NUA for surviving spouse
I have a prospect whose husband was a participant in a large qualified plan with a majority of holdings in company stock. He passed away November of 2011 and was already taking RMD’s from the plan. Now that he has died and the account now belongs to his wife, is she eligible for NUA? What if she has taken a distribution since his death? Do we have one full year or would she have needed to take the full lump sum distribution in 2011?
Permalink Submitted by Alan Spross on Tue, 2012-05-22 16:39
She became eligible for NUA in 2011 due to husband’s death being a new “triggering event”.
If she took a distribution in 2011, she would have needed to complete her LSD in 2011. Otherwise, her distribution becomes an intervening distribution that will disqualify her for NUA. I don’t know how the IRS would consider a distribution she took that was required to complete her husband’s RMD for 2011, should that situation have occurred.
If she did not take a distribution in 2011, she is still able to take a qualifying LSD in 2012. That means that the entire balance of plans of the same type would have to be distributed by 12/31/2012. If she requests a distribution of the employer shares, the value of that distribution would also be applied to her 2012 RMD as beneficiary of his plan. Before acting, she should get a quote on the cost basis per share of the company shares and also verify that the plan will report NUA in Box 6 of the 1099R if she elects to distribute the shares.