ESOP rollover

Submitted by Stephen Csenge on Thu, 2017-02-23 20:43

Husband, age 53, died in a work accident. His employer has an ESOP plan and the husband has about $150,000 in value. It is a medium size private company so there would be no NUA opportunity. How is the account rolled over to the wife? Does it need to go to an inherited IRA first then move to her’s? Can the ESOP issue a check to her and then do a 60 day rollover?



Submitted by Alan - IRA critic on Thu, 2017-02-23 21:27

  • Surviving spouse inherits any NUA options that the participant would have had, and NUA may be possible even if the shares must be sold back to the company. She should look into this before dismissing NUA, particularly if she needs this money to live off fairly soon.She would just have an immediate tax impact vs. selling later on. Cost basis as a % of FMV needs to be determined.
  •  If surviving spouse was the sole beneficiary, her RMDs do not begin until husband would have reached 70.5 if she elects a direct rollover to an inherited IRA. If NUA is not applied, then the direct rollover should go to an inherited IRA if she needs money before 59.5 since the 10% penalty would not apply to inherited IRA accounts. A direct rollover also avoids 20% withholding. She can then roll the inherited IRA over to her own IRA at 59.5. 

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