3993 / Is the value of a death benefit payable from a qualified plan includable in the employee’s gross estate?
In general, yes, if the employee dies after 1984.
Estates of Decedents Dying After 1984
The present value (at the date of the decedent’s death or at an alternate valuation date) of an annuity or any other benefit payable to any surviving beneficiary under a qualified plan on the death of a participant, other than death proceeds of insurance on the participant’s life, is includable in the decedent’s estate.1
The Tax Reform Act of 1984 generally repealed the estate tax exclusion discussed below for estates of decedents dying after 1984. The repeal does not apply to the estate of any decedent who was a plan participant in pay status on December 31, 1984, and who irrevocably elected the form of the benefit before July 18, 1984.2 The Tax Reform Act of 1986 provided that these conditions are considered met if the decedent separated from service before January 1, 1985, and does not change the form of benefit before death.3 Qualified plan benefits rolled over to an IRA are treated as IRA benefits ( Q 3712) that are not eligible for the TRA ’86 separation from service rule.4 For the meaning of the term “in pay status” and the requirements of an irrevocable election of the form of benefit, see Temporary Treasury Regulation Section 20.2039-1T.