403B no beneficiary designation goes to the estate
Is it better to take a lump sum or take the 5 year distributions for 2 403B’s that are going to the estate? Whose taxes do the distributions go on – estate or personal? Does it matter the amount of money? One was in the 3000$s and one was in the 17000$s.
The estate will be split between a minor and a non minor.
Permalink Submitted by William Tuttle on Tue, 2018-07-17 05:42
Permalink Submitted by Bruce Steiner on Tue, 2018-07-17 13:41
Permalink Submitted by Alan - IRA critic on Tue, 2018-07-17 15:39
With an estate as the listed or default beneficiary under a qualified plan, there is no option of a direct rollover from the plan to an inherited IRA, which would have been the only possibility of inherited IRAs. And the 403b provisions will likely indicate a lump sum distribution to the estate to divest themselves of the inherited assets and avoid any possible litigation or executor related problems that could arise within the estate. At that point, the entire balance is taxable to the estate (lump sum 1099R to estate EIN), and while the estate could retain the distribution at the higher tax rates, in most cases it would be passed through to the estate beneficiaries. Not clear if kiddie tax issues would justify the estate paying the taxes, but it is possible given the small amount the minor will inherit.