Administrator of brothers estate–brother died without a will at 49 years of age & no bene for 401K.
TItled 401K : Estate of Brother (First & Last Name).
Estate 401K to be divided 1/3 1/3 1/3
The IRA COMPANY SAYS I can only withdraw as a full amount check payable to the estate after they withhold
20% federal tax + 2% state tax.
Can I just transfer this to 3 inherited IRA accounts (for 3 different beneficiaries?
So…If I get a court order which says the estate is supposed to be divided 3 ways and names the individual IRA plan…are there any options where:1. Each named beneficiary in the court order pays the taxes? and can deposit this $ amount in an IRA?or2. Do I need to have the probate tax lawyer file yet another tax return for the estate for 2017 for the 3 IRA accounts that were in my brothers name with no beneficiary listed?unless that designated beneficiary ……can be designated by the Court?
there are no children or spouse. the father waiver his rights in the estate, and they were assigned to the 3 siblings.would the 401Ks plan be able to cut 3 checks, payable to each beneficiary? Is it possible to elect to have 10% withheld from each check in lieu of 20% for the lump sum. Or should I just ask for the estate to get the check since it’s already August and the estate will have to pay taxes anyway as distribution hasn’t happened yet? Since it looks as though there’s no way to roll the 401K plans over.there are 2 401K plans for sure and the decendent lived in California.
The chance of the plan doing that is extremely slim. Plans want to avoid any possible liability arising out of estate settlements, but you can always ask them the question including the withholding question. There is no mandatory withholding here since the distribution is not eligible for rollover. For a distribution to the estate, while the estate must report the income on Form 1041, the estate can pass the taxes through to the beneficiaries of the estate. If the estate were to pay taxes the rate would be much higher than that of the individuals, so passing the taxable income through to the beneficiaries will save on taxes and will be much easier for the administrator.
so I should be able to ask for 2 checks payable to the estate without any withholding and let the beneficiaries know they will have to pay taxes on this.
Only one check is needed for the lump sum distribution to the estate, but withholding can be declined because the distribution is not an eligible rollover distribution. But you might warn the estate beneficiaries that they may need to increase their own withholding or pay estimates for 9/15 and 1/15/2018 if they need to in order to avoid underpayment penalties.
Permalink Submitted by Alan - IRA critic on Mon, 2017-08-21 23:18
A direct rollover to an inherited IRA can only be done by a designated beneficiary or qualified trust beneficiary, not by an estate. The death benefit will have to be paid to the estate, and it is probably not likely that the 401k plan will allow that to be done in more than a single distribution. However, I do disagree about the mandatory withholding since that only applies to eligible rollover distributions and this distribution is not eligible for rollover. That said, when taxable distributions are distributed out of the estate to the beneficiaries it could create an underpayment problem if the value of the account is large enough. Beneficiaries may have to pay quarterly estimates.
Permalink Submitted by Mary Conte on Wed, 2017-08-23 19:31
ok. Can I possibly set up a separate bank account where the IRA dollar amount check is transferred, and then distribute that account shares of 1/3 1/3 1/3 for them to deposit in individual inherited IRA accounts?