Qualified Plan Successor Beneficiary
A Successor Beneficiary was told by the bank (custodian/trustee) that they could Not do a Direct Rollover and must take installment payments that were already established by the Designated Beneficiary, is that correct?
Also, if the Successor Beneficiary leaves the asset in the qualified plan, then his beneficiaries will not get to Stretch?
The SPD says:
“Non-Spouse Beneficiaries who inherit Qualified Plan assets may rollover their interest into an IRA established by the beneficiary. This allows for the continued tax-deferral of accumulation while mandatory distributions are taken over the Beneficiary’s life expectancy”
There is no wording in the SPD for Successor Beneficiaries.
Thanks for your reply.
Permalink Submitted by Alan - IRA critic on Tue, 2018-08-28 20:48
The tax code requires a plan to offer a direct rollover to a designated beneficiary, but a successor beneficiary is not a designated beneficiary per that definition. In fact, a direct rollover for a successor beneficiary is not allowed by the tax code, which makes that beneficiary subject to the plan rules. In most cases, the plan would allow the successor to continue the RMD schedule of the deceased beneficiary, but it is also possible that the plan could require a lump sum distribution. Therefore, designated beneficiaries of a qualified plan should seriously consider doing a direct rollover to an inherited IRA, generally by the end of the year following the year of death, to protect the interests of their successor.