1099 R for inherited 401K?

[Matilda]

My brother passed away with with a 401K that had my mother and father as beneficiaries.   Prior to the transfer being made, my father passed away.  The beneficiaries became my father's estate and my mother.  Accounts were set up for my father's estate and my mother and the plan administrator transferred half of the 401K to each of them as inherited 401Ks.  The plans remained intact with no distributions made.  Should there have been a 1099R generated for this transfer?  I am the executor of both estates and I am being told I need to generate a K1 from my brother's estate for the distribution - is this true ?  It is not income yet.  I don't see what to enter on the K-1 form.  No 1099R was received.

I realize when my father transfers his half of the 401K to his heir (my mother) he will have to cash the entire 401K out and transfer cash, and then his estate will receive  1099R with code 4.  At that time, I will generate a K1 from my father's estate to my mother.  

Canan someone help me so I do this correctly?  Thank You

[dmertz]

Since your mother and father were designated beneficiaries of your brother's 401(k), your brother's estate has no involvement in the disposition of your brother's 401(k).  Nothing about it gets reported on an estate income tax return from your brother's estate or on a Schedule K-1 from your brother's estate.

And you are correct regarding your father's half.  Since the inherited 401(k) was set up after your father's death there would be no designated beneficiary of this inherited 401(k) and the plan has no choice but to distribute the account to your father's estate.  In that case your father's estate would file an estate income tax return (Form 1041) and generally would pass the income through on Schedules K-1 to your mother as beneficiary of your father's estate.

[Matilda]

Since my father was alive when my brother passed, he was still a beneficiary.  My father passed two months after my brother.  My father's half was transferred to his estate account exactly the same as my mothers was to her account.  The difference is my father's estate had to then cash out his half while my mother can keep hers intact.

What you said is how I thought it worked - my accountant is telling me different.  He says I need to first do  a K1 with  my brother's estate 1041 to my father's estate (and my mother). I don't know what I would put on those K1s.  I thought the only K1 to come from this would be from my father's estate to my mother (according to his will)  of the cashed out 401K.  You confirmed this.  I guess I need to talk to my accountant.

Thank You

[dmertz]

Your accountant is simply wrong.