Cleaning Up After Formula 409Cleaning Up After Formula 409

After the death of (1) a participant in an employer-sponsored tax-qualified retirement plan that’s a defined contribution plan, or (2) an individual who accumulates an individual retirement account, the benefits from those plans/accounts are payable to a beneficiary. In most cases, the beneficiary is designated by the plan participant or IRA owner. When a trust is named as beneficiary, the trustee of the trust so named will frequently establish an inherited IRA, then effectuate a direct, trustee-to-trustee transfer of the decedent’s plan benefits to the inherited IRA. 

Some retirement benefits are payable in cash and securities that may be transferred to the receiving trust’s inherited IRA, while others pay in the form of an annuity.

Some ...