Spouse Inherited IRA
I have a client that got married one year ago. Prior to getting married there was a pre-nup agreement that had all assets going to their children at death including retirement 401(k) funds.
The husband just died and never had his wife(my client) sign off on the 401(k), by default she is the beneficiary.
Can she disclaim the 401(k) and have funds go to his children that are named as beneficiary and be able to use a stretch IRA? Or would the children have to take the money over 5 years.
Thanks – Frank Dogger
Permalink Submitted by Alan - IRA critic on Thu, 2016-12-22 17:07
Who is the named beneficiary listed on the 401k plan? If the husband passed within 1 year of marriage the plan document needs to be checked to determine if the plan applies the 1 year waiting period. Finally, did the husband pass prior to the RBD?
Permalink Submitted by Frank Dogger on Thu, 2016-12-22 20:26
The beneficiary is the deceased children, his age was 62. They were married 14 months, thanks
Permalink Submitted by Alan - IRA critic on Thu, 2016-12-22 20:49
Yes, she should be able to file a qualified disclaimer after which the children would inherit the 401k. In fact, if she doesn’t the children could commence legal action if the pre nup is clear. The children should then request direct rollovers to inherited IRA accounts and that should be completed no later than the end of 2017 to assure they can stretch the IRA over each of their life expectancies. Otherwise, the children would be subject to the plan’s RMD rules and the plan document might state that the 5 year rule applies.