Retired participant requested direct rollover distributions that were issued and sent, only to sadly pass away days later, before depositing them. Beneficiaries now in an odd spot.
Hello!
Some additional details:
* Two distinct employers, serviced by two different companies, and both are direct rollover distributions of qualified 401(k)s destined for the same traditional IRA elsewhere.
* Decedent was diagnosed terminally ill in the months prior to passing.
* Suffered a stroke days after requesting and became incapacitated.
* Passed away one week after date on the checks about 4 months ago now.
* Age 70, No RMDs
* Decedent’s spouse, passed away as well, 7 months beforehand. All assets shared.
* Checks issued to “IRA Bank Name FBO Participant’s Name”
* The decedent’s two adult children are 50/50 designated beneficiaries of both 401(k)s and the traditional IRA.
* The decedent’s will, admitted to probate, awards both adult children as 50/50 beneficiaries of the estate, in its entirety. Declared the only two heirs.
* Letters of Office appoint both adult children as Independent Co-Executor’s with full control of the entire estate and no court supervision.
* No bond required. No outstanding debt that hasn’t already been paid or had been verified to be payable without the need of the estate’s assets.
* Besides escheatment, the beneficiaries can take possession in every scenario.
If a plan sponsor is giving a hard time and insisting in belongs to the estate, what points of interest should be focused on in making a case that they should go to the beneficiaries in 10-year IRAs, and avoid estate/probate with the 5-year IRAs? I’m have a pretty good idea but checking what I’ve possibly missed.
Permalink Submitted by Alan - IRA critic on Sun, 2024-07-07 16:38
These are direct rollover checks, and because they were distributed and received prior to participant’s death, the executor should be able to deposit them into the intended IRA. The 60 day rollover deadline does not apply to direct rollover checks per PLR 2010-35044. There should be no need to contact the plan sponsor, but if the IRA custodian resists, legal assistance could be needed. Per expert Natalie Choate “EGTRRA makes clear that an executor can roll over a distribution the decedent received prior to death/disability”. If this is a small bank, the executor/attorney should elevate this request to senior staff ASAP, as agreement to accept the checks are more likely to be resisted than if this was a large brokerage IRA custodian.
The IRA custodian should accept these rollover deposits and this should be done before the IRA is retitled in beneficiary form. Fortunately, the children were designated as beneficiaries on the IRA by the decedent. The 1099R must be reported on decedent’s final return.