401(k) distribution to multiple beneficiaries
I have a retired client age 82 with significant money in a former employer’s 401(k). The plan offers are high rate of return in a stable value fund which is not attainable in the world of IRA’s. The clients estate is the current beneficiary. Client is taking RMD’s.
Client is thinking about naming several nieces and nephews as beneficiary.
Q?
1. I need to check with the plan but is it reasonable to think that in the event of client death each of the beneficiaries would qualify to take the distribution as an inherited IRA?
2. If yes to the above, would distributions be required at the age of the deceased client or could they elect to recieve distributions at the age of the designated (oldest) beneficiary?
3. Would distributions to individual inherited IRA’s qualify as separate shares so each beneficiary could take RMD’s over their individual life expectancy.
Permalink Submitted by mk foss on Wed, 2013-06-26 20:33
He should name the beneficiaries. They will be able to use their own life expectancies as long as they do a nonspouse rollover of the 401(k) benefits. All 401(k) plans must allow this. It might be easier if he rolled the benefits to an IRA now and named the nieces and nephews as beneficiaries – but if he’s set on enjoying the returns provided by the 401(k) plan, that’s fine.
Permalink Submitted by Alan - IRA critic on Wed, 2013-06-26 20:44
He should also notify the beneficiaries that the rollover to separate inherited IRAs must be done no later than 12/31 of the year following the year of his death in order for each beneficiary to use their own life expectancy. These beneficiary RMDs also assume that he is unmarried at the time of his death or spouse has waived her right to be sole primary beneficiary.