Family Trust 401k Plan Beneficiary / Treat as an Inherited IRA??

Submitted by Steven Sloan on Thu, 2015-06-25 22:02

The deceased 401k Plan paricipant named the Family Trust beneficiary.
ER plan sponsor wants an EIN to process the distribution.
The Family’s attorney will use the surviving spouse’s Soc Sec No.for
the Trust and then treat it as an Inherited IRA. THE Trust is revocable.
Are we OK?



Submitted by Alan - IRA critic on Fri, 2015-06-26 17:10

Q&A 16 of Notice 2007-7 is copied below: 

Q-16. If the named beneficiary of a decedent is a trust, is a plan permitted to make a direct rollover to an IRA established with the trust as beneficiary? A-16. Yes. A plan may make a direct rollover to an IRA on behalf of a trust where the trust is the named beneficiary of a decedent, provided the beneficiaries of the trust meet the requirements to be designated beneficiaries within the meaning of § 401(a)(9)(E). The IRA must be established in accordance with the rules in Q&A-13 of this notice, with the trust identified as the beneficiary. In such a case, the beneficiaries of the trust are treated as having been designated as beneficiaries of the decedent for purposes of determining the distribution period under § 401(a)(9), if the trust meets the requirements set forth in § 1.401(a)(9)-4, Q&A-5, with respect to the IRA.

Note that 1.401(a)(9)-4 Q 5 describes a qualified trust, and one of the requirements is that the trust become irrevocable upon the death of the plan owner. Once irrevocable, the trust will need an EIN. If the trust is not irrevocable upon owner’s death, there would be no inherited IRA rollover.

Submitted by Bruce Steiner on Fri, 2015-06-26 17:44

  • Even if it’s revocable, if the IRA owner revokes it after his/her death, we won’t know about it.

 

  • The facts presented aren’t clear enough for anyone to be able to respond.  If the surviving spouse can revoke the trust, or can withdraw all of the trust assets (in which case it wouldn’t be a “Family Trust,”) then the surviving spouse can roll it over into his/her own IRA.  If the surviving spouse can’t revoke the trust or take all of the trust assets, then it would use its own taxpayer identification number and not the surviving spouse’s taxpayer identification number.

 

  • Bruce Steiner, attorney, NYC, also admitted in NJ and FL

 

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