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heckle42

403 B Cash Out To Beneficaries At Death

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Question for those in the know: If you have a 403 (b) account and you die, what happens to the 403 (b)money that goes to your beneficiary? Does that money have to taken out of the account over a specified time frame or does that money stay in the 403 (b) account? If it has to be liquidated, does that mean it would have to be placed in a non qualified retirement plan?

 

Also, since one has to begin taking required payouts at 70 1/2, is it prudent to roll these over into Roth IRA's and also for the reasons stated in paragraph one? Please advise on this topic.

 

heckles

 

 

 

 

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If you haven't already you might want to see what we have on this subject in our FAQ page In addition to what is pasted below there is a chart that follows with a little more specifity.

 

What happens to 403(b) money in the event of death?

Death benefits to be paid under a 403(b) plan depend on when death occurs and who is the designated beneficiary on the plan. The Internal Revenue Code states that distributions generally must be made from a 403(b) plan by the participants required beginning date, which is April 1 of the year following the year in which the participant attains age 70 1/2. Different rules apply to death benefits depending on whether or not death occurs before the required beginning date. The following table briefly summarizes the death benefit requirements of a 403(b):

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Dan Otter

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What happens to 403(b) money in the event of death?

Death benefits to be paid under a 403(b) plan depend on when death occurs and who is the designated beneficiary on the plan. The Internal Revenue Code states that distributions generally must be made from a 403(b) plan by the participants required beginning date, which is April 1 of the year following the year in which the participant attains age 70 1/2. Different rules apply to death benefits depending on whether or not death occurs before the required beginning date. The following table briefly summarizes the death benefit requirements of a 403(b):

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Dan Otter

 

 

 

"Non-spouse Distributions are to begin by the end of the year following the year of the employee's death. Distributions are to be made over the beneficiary's life expectancy, using the single life expectancy table published by the IRS and the beneficiary's age on their birthday in the year after the employee's death. In subsequent calendar years, the distribution period is reduced by one for each year that has elapsed since death. The remaining account must be distributed over the beneficiary's life expectancy, using the single life expectancy table published by the IRS and the beneficiary's age on their birthday in the year following the employee's death. In subsequent calendar years, the distribution period is reduced by one for each year that has elapsed since death."

 

Dan,

 

I have copied the above quotation from the link you posted in your original response to this inquiry. I believe it to be partially in error, and would appreciate your (or anyone else's) input. The quotation suggests that a non-spousal beneficiary MUST receive the decedent's 403b funds over that beneficiary's own life expectancy, based on actuarial tables. I think that while this is probably possible, to imply that this is the ONLY way a non=spousal person can inherit is incorrect. Unless the beneficiary statement specifies such a disbursal, the benficiaries have the option of taking all funds upon death of the 403b holder. IF the beneficiary WISHES to accept such an arrangement, I think it is possible. My children are to receive my 403b money over a 20-year period, with 5% per year available for withdrawal (TIAA-CREF). Unless, it is otherwise stipulated in the beneficiary statement on file from the 403b holder, I believe that non-spousal beneficiaries receive the entirety of their inheritance upon the death of the 403b holder. If I am correct about this, please lend your authority to the correction, because the quoted selection could alarm many 403b owners who would not wish their beneficiaries to wait their own lifetimes in order to fully inherit.

 

Russ

 

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Guest Sierra

It goes without saying that a pre-tax account may be fully liquidated by the beneficiary (spouse or non-spouse) immediately upon death of the owner. Taxes would be due and the various taxing authorities would be in tax heaven. Recognizing the tax burden associated with a full liquidation the Congress has given all beneficiaries the OPTION of spreading the liquidation over long periods of time so as to spread the tax burden over the same long period of time. Congress will definitely love you more if you as a beneficiary, or for that matter the owner, decide to fully liquidate and pay the taxes immediately in one large sum----but it is only an OPTION. THE CHOICE IS THE OWNER or BENEFICIARY'S TO MAKE.

 

Peace and Hope,

Joel L. Frank

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