A husband and wife (age 60+) were killed in a murder case. The husband passed 11:45 P.M. and the wife passed about 2 hrs later in surgery (1:57 A.M.) The husband had a 401k that listed his wife as primary beneficiary and their 2 adult children as contingent. The custodian, Charles Schwab, is stating that since the husband passed first, the 401k must be distributed to the wife’s estate.
Is this correct?
If so, can the children still defer taxes over a 10 year period or will the distribution to the estate be taxable immediately?
If they can still take out the funds over 10 yrs, how do they need to set that up?