could mother inherit NUA from son’s 401(k)
son is deceased and he has a 401(k) with NUA Net unrealised appreciation. question is does mother inherit the NUA and if yes as of what date?
son is deceased and he has a 401(k) with NUA Net unrealised appreciation. question is does mother inherit the NUA and if yes as of what date?
Permalink Submitted by Alan Spross on Wed, 2009-11-18 21:07
Yes, a 401k beneficiary does immediately inherit the NUA potential of employer stock in the inherited plan. The death of the employee is a new triggering event, so the beneficiary must elect a qualified LSD before their own RMDs eliminate the NUA potential because the RMD becomes an intervening distribution. Basically, the LSD requirements of the beneficiary are the same as for the employee, had they lived. The beneficiary does avoid the 10% early withdrawal penalty on the cost basis because the entire LSD is considered a death distribution. In addition, the cost basis and NUA amounts also count toward the RMD of the beneficiary.