08 Oct How widow can handle a small estate

Q. My friend is a recent widow. She’s the beneficiary of her husband’s assets which are a small 401(k) and less than $1,000 of cash. Does she need a separate checking account to pay for funeral expenses and his final car payments? Does she need a federal ID number? Will she owe taxes?
— Friend working

A. We’re sorry to hear about your friend’s loss.

Let’s take these one step at a time.

First, the 401(k) funds will not be subject to tax until they are withdrawn.

“She can withdraw all or any portion so long as she takes out, each year, the minimum required distribution per applicable IRS tables,” said Steven Holt, an attorney and chair of the taxation, trusts and estates department at Mandelbaum Salsburg in Roseland.

Those withdrawals are know as her Required Minimum Distribution, or RMD.

Holt said if the cash account was held in a joint account, the funds belong to her, are immediately accessible and can be used to pay for funeral expenses.

“If the account was in her husband’s name exclusively, then there will need to be a probate proceeding before she will have access to these funds,” Holt said. “I do not see the need for an estate account or an EIN, assuming that the estate funds earn no or very little income.”

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