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A husband has passed away intestate, in California. At the…

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A husband has passed...

A husband has passed away intestate, in California. At the time of his death his 401K administrator audits the company plan for high income compliance. The plan fails and monies need to be returned to the participant, (who is now deceased). The provider insists on a TIN before they release the monies to the estate. Shouldn't the monies simply be disbursed to the surviving spouse? There is no trust.

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

I don't believe so.

Submitted: 24 days ago.Category: Tax
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Answered in 6 minutes by:
3/28/2018
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 24 days ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,987
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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No, this is not a beneficiary payout, it's a corrective distribution, so simply income.

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Here, it's Income in Respect of a Decedent (IRD)

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Any income (over $600) received after the date of death is paid to the estate.

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When someone dies, their assets become property of their estate. Any income those assets generate is also part of the estate and may trigger the requirement to file an estate income tax return.

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The decedent and their estate are separate taxable entities. Before filing Form 1041, you will need to obtain a tax ID number for the estate. An estate’s tax ID number is ***** an “employer identification number,” or EIN, and comes in the format 12-345678X. You can apply online for this number. You can also apply by FAX or mail; see How to Apply for an EIN.

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Now, in doing the 1041, you'll want to use schedule B to take a distribution deduction and pass that income out to the spouse via the 1041's K-1 (so that taxes can be paid at the MUCH lower individual rates)

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Trusts get to the highest bracket at a little over 12,000. Individuals don't reach that top rate until over 400,000 of income

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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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