QDRO Distribution to an Estate

A former spouse of a participant passed away.

The QDRO requires the distribution in this case to be made to the estate.

If the distribution is paid to the estate itself, what are the tax and penalty consequences? Is it the standard 20% Federal Tax withholding and no 10% penalty?

Thanks!

A few other discussion threads here touch on taxation w/r/t estate.  In a nutshell, an estate is not a natural person, so it cannot open (or add to) an IRA.  Therefore, assuming the distribution is a lump sum, the distribution to the estate is NOT rollable.  Therefore, the 20% withholding does not apply.  Therefore, the "other default" withholding applies: 10%. 

However, as mentioned in the instructions to Form W-4R and/or Form W-4P, an estate has the right (just like any other recipient) to elect zero withholding.  Therefore, the plan administrator must provide the opportunity to make such election (eg, put a copy of the forms in the hands of the estate administrator).

But, before that, the plan needs ERISA legal advice to confirm whether or not the "...QDRO requires the distribution in this case to be made to the estate."  (OK, I admit to being skeptical.  It is not common for a QDRO to do so, and it seems unlikely the QDRO can override what the plan says about the spouse's right to name his/her own beneficiary.)  If the payment to the "former spouse" is the remainder of a "ten-year-certain-and-life" form of payment (or something similar), that might be one case where the remaining payments* go to an estate; however, before jumping to such conclusion, it is important to determine whether the spouse has already elected a beneficiary.  Thus, my urging to get legal review.

*Note this example might have "remaining payments" as a monthly/quarterly annuity or a lump sum, maybe an option.  It seems likely the estate should request a lump sum if given the option.

Are you talking about an ERISA qualified plan? 

Were payments from a defined benefit plan being made to the Alternate Payee  at the time of the Alternate Payee's death?   Why would not such payments terminate at the death of the Alternate payee? 

Or are you dealing with a lump sum an a annuitized payment from a defined contribution plan per Secure 2.0? 

Or are you dealing with FERS or CSRS where 5 CFR 838.237(b) applies?

I am sorry for being confused.