72t
Client, age 60, started 72t distributions 3 years ago. If client dies before the end of the fifth year of withdrawals what effect, if any, will it have on spousal beneficiary? Non-spousal beneficiary?
Client, age 60, started 72t distributions 3 years ago. If client dies before the end of the fifth year of withdrawals what effect, if any, will it have on spousal beneficiary? Non-spousal beneficiary?
Permalink Submitted by Alan Spross on Thu, 2008-10-30 21:52
A 72t plan is terminated without penalty in the event of death or a qualifying disability. A spousal beneficiary can take death distributions and the 1099R will be coded to reflect that. The surviving spouse could also do a rollover to their own IRA, and none of this would have any adverse consequences with respect to the 72t plan.
A mid year death would result in two different 1099R forms. Distributions prior to death would be coded the same way the custodian has been coding prior distributions. Some offer the exception code and some do not, forcing the taxpayer to file Form 5329. Distributions taken by the beneficiary will carry be coded as death distributions.
The same is true of a non spouse beneficiary, except that they cannot roll over the funds to their own IRA.