Beneficiaries
A client referred a neighbor to our office. The neighbors father passed away at the age of 57 on January 14, 2017. He had a $ 800,000.00 401(k) that listed his his wife ( who passed away 12 years ago ) as the only benefactor. They had three boys ( ages 35, 30 & 25 ) that were never listed as contingent beneficiaries. What’s next? Must benefits be paid out within 5 years? Will the proceeds have to go through probate? Just checking. Thank you as always.
Permalink Submitted by Alan - IRA critic on Wed, 2017-01-25 00:48
Most likely his estate will be the beneficiary, but the plan administrator should be asked to confirm that. There is a small chance that the children might be the default beneficiaries. I assume he was not remarried upon his death. If his estate is indeed the beneficiary then the 5 year rule will apply and the plan will be subject to probate and the terms of his will. It is also possible that the plan provisions call for a lump sum distribution as well in this situation meaning that even the 5 year rule could not be utilized. Also, with an estate as beneficiary a direct rollover to inherited IRAs are not allowed. Therefore, not updating his beneficiaries was a costly mistake.
Permalink Submitted by Bruce Steiner on Wed, 2017-01-25 17:26
You probate the Will, not the assets. That’s not the issue. The issues are the loss of the stretch and exposure to creditors.