Taxation of Pension Benefits? (pay, debts, account, income)

[golfgal]

Does anyone know how or if the death benefit payout from a pension plan is taxable? I don't have any specifics about the actual plan yet but in general how would a defined pension plan be taxed to survivors?

[Dan Delgado]

golfgal,

try this link it may help with your question

What is a Defined Benefit Pension Plan?

[golfgal]

Originally Posted by Dan Delgado

golfgal,

try this link it may help with your question

What is a Defined Benefit Pension Plan?

Thanks. I know what a defined benefit plan is and how it works I don't know how it is taxed to survivors once the employee passes away. I am still waiting on the paperwork, after several weeks of getting the run around from her company . I will have to see how the plan is structured I guess and then go from there.

[Dan Delgado]

golfgal,

some more info, hope it is useful:

Survivor Benefits
Defined benefit pension plans normally provide survivor benefits if a worker dies either before or after retirement benefits begin. This means that if the worker is partially or fully vested, the spouse will automatically receive survivor benefits if the worker dies — unless the worker and spouse have specifically declined the survivor option in writing.
If a worker dies before retirement, the plan does not have to pay the benefits to the spouse until the earliest date that the deceased worker could have begun receiving retirement benefit payments. For example, if a worker dies at age 50, and the plan says that the earliest a worker can receive benefits is at age 55, the spouse might have to wait five years to receive benefits.
If the worker dies after retiring , the surviving spouse will receive at least 50 percent of the benefits the retiree had been receiving if the worker was receiving benefits that included a survivor benefit. The benefits will continue until the spouse dies. Because this type of annuity takes into account the combined life expectancy of the worker and the spouse, and often is paid out over a longer period of time, the worker’s monthly pension payment is usually less than it would have been if the worker and the spouse had declined the survivor benefit.
Generally, pensions cannot be attached for debts owed. However, in the event of a divorce or separation, a judgement, decree, or order made in accordance with a state domestic relations law can direct the pension plan to pay a share of a worker’s pension directly to a spouse, former spouse, child or other dependent. For this to occur, the order must be a Qualified Domestic Relations Order (QDRO) — that is, it must meet legal requirements concerning the information it contains and the benefits involved.

[Dan Delgado]

golfgal,

try this:

Publication 575 (2008), Pension and Annuity Income

[golfgal]

Originally Posted by Dan Delgado

golfgal,

try this:

Publication 575 (2008), Pension and Annuity Income

Thanks. We still haven't gotten the paperwork from the company yet so I don't know if it is the survivor benefit from her pension, if the pension had a life insurance component (which would be best case ) or what. Hopefully the mail arrives on Tuesday with the information. We have a son going off to college in the fall and hopefully this doesn't mess up the financial aid for him.