My client passed away without naming a beneficiary on her 401k, therefore it is going to her estate. The beneficiary of the estate is her minor child. Am I correct in saying that the minor child will be issued a K1 to claim this income and will have to file a tax return? Alternatively, the surviving parent could elect to claim the income on their return.
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Was the 401k actually withdrawn? If so, was it after death?
Was the money distributed to the child?
What is your reasoning that the parent could elect to claim the income? -
The money is sitting in the 401k still waiting for the executor to decide if she should make the distribution prior to the end of the year. My reasoning for saying the parent could elect to treat it as income on their return was based on research on the IRS website.Comment
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A 401k account with no named beneficiary? Sounds unusual, or at least careless.
I don't think a minor can be the owner of a 401k account. That's a "lawyer question."
The mere transfer of the 401k account from the decedent to the child should not create a taxable event. Any withdrawals from that account would change things significantly.
Dependent on what other income issues may occur for the minor child, to include any Schedule K-1 income, a Form 8615 is quite possible.
I agree with TaxGuyBill: What would be the reasoning for the parents to claim the minor's income? ?Comment
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I believe, If you do not designate a beneficiary, your spouse automatically inherits your 401(k) upon your death, but like Duke said that is a lawyer question.Comment
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Terryats, they were unmarried at the time of passing.Comment
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I still think you need to see an a lawyer, as some states if no beneficiary a 401K goes to probate. also the 401K plan has to be checked for its rules (not all plans are the same)Comment
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