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Lev
Lev, Tax Advisor
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My husband had a 401K plan for which his estate is beneficiary. I

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My husband had a 401K plan for which his estate is beneficiary.
I am the executor of his estate and 80% beneficiary of estate proceeds, with 10% for each to our two children. The brokerage company will not let me roll it over to my 401K and insist that I can not trade on it so I liquidated and got a check for the amount. Can I now roll it over to my 401K? Check is made to his estate.
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.

Hi and welcome to Just Answer!

Because the estate is beneficiary of the 401k plan - you may not treat these funds as your own - and may not rollover to your retirement plan.

Funds should be distributed to the estate within five years - you may want to spread distribution over several years and minimize tax pressure.

 

Only if you are a beneficiary of the 401k plan you may treat it as your own.

I am surprise because usually the spouse is automatically treated as a beneficiary.

Since in your situation - the beneficiary is the estate - most likely you waived your rights.

Unfortunately - the brokerage company is correct for not letting the transfer to your own 401K plan.

However - you may rollover into so-called "inherited IRA" under the name of the estate - and as the executor of his estate - will be able to manage that account. Still full distribution is required within five years.

 

Let me know if you need any help.

 

Customer: replied 2 years ago.

Will I manage the fund and ask for x amount each year? Will this be taxable when I receive it? Would I be better off distributing to childrens trust - both adults and in a higher tax bracket than me or distribute it to me. This change was made (to have the trust as benificiary) per the attorney who made the will and after this one my husband had decided to leave his other IRA's to me which I have rolled over.

 

Thanks

Expert:  Lev replied 2 years ago.
You will be able to manage funds if they are transferred to "inherited IRA" account.
Yes - the distribution will be taxable. Since the estate is the beneficiary - it will be taxable for the estate - and you will be required to file an income tax return for the estate.
As an executor of the estate - generally - you would have a choice - either the estate pays taxes on distributions - or taxable income is passed to beneficiaries.
Originally - you mentioned that the estate is the beneficiary - now you are talking about the trust...
However - general rules would be same.
If you are the beneficiary of the 401k account - as a spouse - you may treat it as your own - and may be eligible to rollover to your own retirement plan.
However - since you are not a beneficiary - you do not have such option.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22829
Experience: Taxes, Immigration, Labor Relations
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