Handling a deceased parent's 403(b) without contingent beneficiaries or will.

Question

I'm the executor of my mother's estate, and she passed away in 2013. Her 403(b) account, valued at $7,000 today, listed my father, who passed away in 2010, as the beneficiary. There are no contingent beneficiaries, and there was no will. My brother and I are the equal heirs of the estate, which is settled in Massachusetts. The 403(b) plan provider mentioned the termination of the account. I'm concerned about handling these funds correctly, especially about missed distributions and potential tax penalties. What steps should I take?

James L. Arrasmith · Answer

Since your mother’s 403(b) listed your father as the beneficiary and he passed away before her, and there are no contingent beneficiaries, the account is likely considered part of her estate. You should confirm this with the plan provider in writing and request guidance on how to proceed with distribution to the estate. 
 
Next, as executor, you can include the 403(b) balance in the estate assets and distribute it according to Massachusetts intestacy laws, which in your case is equally between you and your brother. Keep detailed records of all communications, forms, and transfers related to the 403(b), as this will help with estate accounting and tax reporting. 
 
It’s important to address potential tax implications. The 403(b) distributions may be subject to income tax, and any missed required minimum distributions from the account could have penalties. Contact the plan administrator to calculate any missed distributions and follow their process to withdraw the funds correctly. Reporting the distribution on the estate’s tax return and any personal income taxes will help you comply with IRS rules. Acting promptly ensures the account is handled properly and avoids future complications.

Q: Handling a deceased parent's 403(b) without contingent beneficiaries or will.