Estate as Beneficiary of 401k – shortened payout
Client’s brother age 60 died with 401k with no named beneficiary. 401k plan provider insisting that the account be paid out to the estate in a lump sum rather than taken within 5 years.
Does estate have any other options regarding stretching payout or taxes or are they subject to the 401k plan provider lump sum payout?
No rollover possible from estate to Inherited IRA account?
Thanks
Howard
Permalink Submitted by Alan - IRA critic on Tue, 2018-09-18 00:31
Howard, no rollover possible to an inherited IRA per the tax code. That’s why leaving a 401k to the estate is even worse than leaving an IRA to the estate. Almost all 401k plans will require a lump sum, and do not wish to dispense RMDs over the decedent’s life expectancy or the 5 year rule. If the amount is substantial, the client should ask an estate tax pro if using an estate fiscal year instead of a calendar year would be helpful.