I am the beneficiary of my deceased father’s 401K and need to split the money with siblings, how can I and make sure they will be responsible for paying the taxes?

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I am the beneficiary of my deceased father’s 401K and need to split the money with siblings, how can I and make sure they will be responsible for paying the taxes?

I want them to pay the IRS directly.

Asked on April 3, 2012 under Estate Planning, New York

Answers:

Steven Fromm / Steven J Fromm & Associates, P.C.

Answered 9 years ago | Contributor

If you are named the beneficiary, then you would be making a gift to your siblings every time you give them a share.  In any event, you are responsible for the income taxes on the distribution.  Do not do anything until you speak with an estates or tax attorny since you are exposing yourself to some rather complicated and expensive tax implications.

Sharon Siegel / Siegel & Siegel, P.C.

Answered 9 years ago | Contributor

I assume you are the sole designated beneficary of the 401K.  If you are the sole designated beneficiry, the tax benefits and payments are your responsibility.  If you are one of many beneficiaries of the 401K, then each beneficiary will be responsible directly to the IRS.  If you as sole beneficiary decide to generously give to your siblings, it poses many issues, tax only being one of the issues.  For example, why not preserve a retirement asset and defer your own payment?  Why are you taking a lum sum payment?  Why are you splittingt an asset that you were the designated beneficiary of with your siblings.  An asset which has a designated beneficiary is not governed by a will.  I suggest that before you act, you consult a lawyer.

 

 


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