Spouse to remain Beneficiary at 43
I have a client who’s spouse recently died and she is only 43 with 2 boys. Husband had a 401k with 210k in it. My understanding is that we should set it up as an inherited IRA so that she can have access to the funds if she needs them but that she doesn’t have to take distrbutions until the husband would have reached 70 1/2. ( we will roll the funds over to her own account once she turn 59 1/12) Is this correct? she is the sole beneficiary. Am i missing anything?
Thanks in advance[/b]
Permalink Submitted by Alan Spross on Mon, 2007-10-29 20:03
Nick, you are correct.
Most plans will allow the spousal transfer to an inherited IRA, but it’s not incorporated into the Regs yet, and depends on the plan’s recognition of PLR 2004 50057. Of course, the IRA custodian must also be willing to set up the IRA properly in beneficiary status.
Some plans are now more concerned with retaining assets, and therefore the plan COULD be willing to allow distributions to the survivor directly from the plan itself. That’s probably less attractive, but does present a possible option.
Either way, successor beneficiary designations should be done ASAP.
If husband was older and with the employer for a considerable time, there may also be NUA potential with employer stock shares. This should be determined before any IRA transfer is done, because this benefit is forfeited once the shares reach an IRA.