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If minors who are not currently earning income were listed as beneficiaries on a deferred comp plan and owner of that plan passed away at age 63, what's the right approach to minimize taxes. From what I've read it sounds like maybe rolling it over to an inherited IRA and making equal distributions over 5 years, but I'm not too confident. Does anyone know?

  • Where is the deferred compensation plan invested? And did the owner of the plan have an offsetting loan? Unless the details of the deferred compensation plan are known and give a different answer, the default is that the deferred compensation is paid to the estate of the deceased and is income with respect to a decedent to the estate. I don't think that an Inherited IRA can be created from non-IRA funds, but maybe the deferred compensation plan has a similar rule: if the employee dies, the compensation is paid out to the beneficiaries in 5 annual instalments. – Dilip Sarwate May 26 '15 at 2:39
  • Invested at Voya. No loans were taken out against it. The estate didn't go through probate due to not crossing the size threshold, and the deferred comp plan had beneficiary designations which I believe would bypass any estate even if there was one. So you're thinking it wouldn't go to an inherited IRA, but rather just be paid out in 5 annual installments? – g491 May 26 '15 at 15:39

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