Experience and Benefits
Taxation of Distributions After Death
(a) Estate Tax, DEFRA repealed the $100,000 estate tax exclusion for decedents dying after December 31, 1984, with certain grandfathering provisions for participants in pay status prior to 1985. IRA plan benefits are now fully subject to federal and state estate tax. Estate tax relief can be obtained from the marital deduction, the unified credit, or the charitable deduction.
(b) Income in Respect of Decedents, Distributions received upon your death are items of "income in respect of a decedent” ("IRD") and are generally taxed to beneficiaries in the same manner as they are taxed to you.
- An income tax deduction is available to the beneficiary in the amount of estate tax attributable to the benefit or IRD.
- An installment distribution of plan benefits should not be used to fund a pecuniary bequest since such a transaction will be treated as a disposition, which accelerates IRD.
(c) Tax‑Free Rollover, The tax‑free rollover is available only to benefits payable to the surviving spouse of the participant. Benefits payable to non‑spouse individuals, estates, or trusts will not be eligible for tax-free rollovers.
(d) A personal representative may complete a rollover transaction within the 60‑day rollover period if a decedent receives plan benefits before death, but dies before completing the transaction during the 60‑day rollover period.