IRA/401k Q: Tax consequences of croaking without a beneficiary?

Factual Questions
1

Not concerned about estate taxes for this question, just the disposition of the assets.

Assume I have a will, but forgot to name a beneficiary–or the person I was planning to leave it to died, and I never got around to picking someone else, so I just deleted his/her name(s).

My will states, for example: These three relatives each get 1/3 share of what (if anything) is in my estate.

Does my IRA/401k then get split three ways in the same way as if I had named then three as equal beneficiaries?

There are tax consequences when you withdraw money from an IRA/401k. Assume that all beneficiaries are old enough that early penalties will not apply. Would the normal procedure then be to cash in the account, with the attending Federal, State, (and whatever) taxes and distribute the money, or transfer it directly to the devisees existing IRAs (if one does exist) without a tax penalty?

You’re not my accountant. I’m not your client. Some of this might vary from state to state. And. . . just in case you’re wondering, no I don’t. :smiley:

2

This is a very complicated question to which I have only a few answers in which I have any confidence.

What happens with a 401(k) will depend on the specifics of that plan. Get in touch with the plan administrator and they will tell you what to do.

If you are not the spouse, you cannot roll it into your own IRA.

The basic procedure for non spouses is to place it in a special account (I don’t know what that account is called). The beneficiary needs to withdraw money from that account (and pay taxes on it) on a schedule. At this point my understanding gets far too fuzzy for GQ.

3

Just to clarify, the beneficiary can always withdraw more than the schedule calls for, up to the full amount, but they must, of course, pay taxes on it.

4

[ul]
[li]http://www.irs.gov/[/li][li]http://www.irs.gov/pub/irs-pdf/p559.pdf[/li][li]http://www.irs.gov/pub/irs-pdf/p590b.pdf[/li][/ul]