If the proceeds of a pension plan are being distributed and the original beneficiary dies, the:
A. person who inherits the plan assets can elect to be treated as the original beneficiary if that person is the spouse of the original beneficiary.
B. person who inherits the plan assets can elect to be treated as the original beneficiary if that person is unrelated to the original beneficiary.
C. person who inherits the plan assets will receive the remaining plan assets tax-free.
D. balance of the pension plan assets must be distributed in the year of death.
is it D
To determine the correct answer, we need to understand the rules regarding the distribution of pension plan proceeds upon the death of the original beneficiary.
The correct answer is not D. The balance of the pension plan assets does not necessarily have to be distributed in the year of death.
In general, when the original beneficiary of a pension plan dies, the proceeds of the plan typically transfer to a designated beneficiary or beneficiaries. The specific rules regarding the treatment of the plan assets depend on various factors, such as the type of pension plan and the relationship between the original beneficiary and the designated beneficiary.
Option A is correct: If the person who inherits the plan assets is the spouse of the original beneficiary, they can elect to be treated as the original beneficiary. In other words, they can assume the rights and benefits of the pension plan as if they were the original beneficiary.
Option B is incorrect: If the person who inherits the plan assets is unrelated to the original beneficiary, they typically cannot elect to be treated as the original beneficiary. The rules surrounding the treatment of unrelated beneficiaries may vary depending on the specific pension plan and applicable laws.
Option C is incorrect: The person who inherits the plan assets will generally not receive the remaining plan assets tax-free. There may be tax implications depending on the type of pension plan, the age of the original beneficiary at the time of death, and other factors. Taxation of pension plan proceeds is subject to the laws and regulations of the relevant jurisdiction.
Therefore, the correct answer is option A.