Macomb, MI asked in Estate Planning for Michigan

Q: How do you maintain tax deferred status of pension check made out to an estate if recipients are minors?

minor children will be recipients of a lump sum pension check that will have tax deferred status, I think. Assuming the father will receive and control this money, (pension money is from divorced, deceased mother of minor children) I, as the representative will be transferring the money over. If I run it through the estate account, taxes will be due in that tax year instead of being able to keep it deferred for whatever time period is allowed. I know it can be cashed in the estate account and redeposited within 60 days without the penalties and such, but can it be transferred by staying sheltered somehow? Would the check be made out from the estate account to the father and stipulated that it is for the children?

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1 Lawyer Answer
Kenneth V Zichi
Kenneth V Zichi
  • Estate Planning Lawyer
  • Fowlerville, MI
  • Licensed in Michigan

A: The tax status of 'pensions' is defined by law, and with the exception of surviving spouses, you cannot defer the taxes for long. If a NATURAL PERSON is named as a beneficiary, there is a possibility of extending the tax 'window' but minimum distributions are required each year, and you will need to insure the taxes are paid on those distributions.

If an estate, non-qualified trust or other non-natural person is the 'beneficiary' then the taxes are due upon distribution in most cases. You need to consult with a local accountant or tax attorney to review the facts of your situation to get real advice though. This is a very complicated area of law and any 'off the cuff' responses will likely be incorrect!

Seek that local tax attorney advice!

-- This answer is offered for informational purposes only and does not constitute legal advice or create an attorney/client relationship.

I am licensed to practice in Michigan only. Please seek competent local legal help if you feel you need legal advice

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