My brother died 3 months ago. I received a notice in the mail telling me I am a non spousal beneficiary on a 401 K plan of his. He set this up prior to getting married a year ago so that I would slowly distribute it to his children instead of them getting a lump sum. He also has a sizeable tax debt to the IRS for years of back taxes. Does the IRS have dibs on this or is it mine? If I get it, is it free and clear or do I have to pay my own taxes on it? Can the wife lay claim to it?
Estate Planning Attorney
First, you may not be the one entitled to receive the proceeds.
Federal and state law may provide that your brother's surviving wife is entitled to some or all of the 401(k) unless she waived her rights to it. In your place, I would not sign the forms from the plan administrator. Instead, I would inform them of his marriage and inquire as to whether they have a spousal waiver on file.
Second, if you do receive the proceeds and your brother's tax debts go unpaid, you may be held liable under a theory of "fiduciary liability."
A local attorney versed in retirement benefits and taxes can help sort this out for you.
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