Distribution to a Testamentary Trust not eligible for rollover

[Guest GordonJ]

A 401K participant "John Smith" dies and the beneficiary is a Testamentary Trust of John Smith. A distribution is requested. To the best of my knowledge, this distribution is not eligible for rollover as it is not to a spouse. Also such a distribution has 10% withholding. Does this make sense? Any help is appreciated

[Mary Kay Foss]

It does make sense. A distribution that qualifies for rollover is subject to 20% withholding if it isn'r rolled over. The 10% withholding rate applies to "nonperiodic distributions not eligible for rollover.

Dying with money in a qualified plan with a nonspouse beneficiary usually has this kind of result.