deceased client with assets in company plans
I have a client in two plans I advise. A 457 and a 403b. The client died in 2017. HUsband has not moved the funds out. they were both over 59 1/2, the plan doesnt offer alot of options and I have advised him he should seperate it. As of today, the assets are still as they were in each plan in the deceased clients name. is there a penalty to leaving this like this? how long can husband leave the funds there? any guidance would be helpful. There are lots of investment and planning reasons to remove from work plans but curious if any other tax/ IRS issues. Thanks in advance.
Permalink Submitted by Alan - IRA critic on Fri, 2019-03-15 15:47
What were the ages of each spouse at the end of 2017? Was husband the sole beneficiary? These questions relate to RMD requirements, which if not met would result in a penalty or at least the need to request a penalty waiver. If a direct rollover to an IRA is done this year any RMDs will have to be distributed first. The client needs to report the death, send the type of death cert copy the plan requires and his SSN and other info required to have the account retitled in beneficiary format. He also needs to name his own beneficiary. Were he to pass without having the accounts retitled, settling his estate would be more difficult.
Permalink Submitted by John Jawor on Mon, 2019-03-18 20:26
Husband was sole beneficiary. Client was 59 when she passed in 2017. Husband is mid 60 I believe. He is tough to get informatiion from. There are obviously alot of reasons to seperate, but I am trying to make sure he isnt doing harm by leaving it there. Thanks for your advice.
Permalink Submitted by Alan - IRA critic on Mon, 2019-03-18 23:57
There are not any current RMD related issues, since beneficiary RMDs are not required until the year she would have reached 70.5. If husband wants to delay RMDs as long as possible, he would not do a rollover to his own IRA until that year. However, there is a small chance that these plans contain a mandatory 5 year rule, or they may require the beneficiary to make an election of life expectancy or the 5 year by 12/31/2022. There is a risk of missing an important election date depending on the plan provisions, but the only downside of rolling to an owned IRA is that RMDs will have to start at 70.5, a little earlier than if left in the current plans as beneficiary. Of course, the husband needs to have these plans retitled in order for him to name his own beneficiary, and he also needs to find out what the plan provisions are with respect to RMDs if he does not do the spousal rollover.