To whom should Post-Death Retirement benefit be Attributed To?

[Lonestar]

Relative passed early January 2021 after having received Jan pension check. The Plan then paid one-month post-death payment as their Plan dictates. Individual's 1099-R for deceased includes payments for Jan and Feb, yet she was deceased in Feb. I don't think a deceased individual can receive anything. If true, then question is, who is, or should that Feb payment be attributed to? Her estate or beneficiaries? Do they need to re-do the 1099-R and split between her as individual (for Jan payment) and either her estate or her beneficiaries (for Feb payment)? Or can I somehow extrapolate and do on multiple returns? (I don't see that this is possible.)

Hopefully, this makes sense. 

[bosso3]

As I understand your statement, your relative received a pension payment in January 2021, died in January 2021 and also received a pension payment in February 2021.  And the 2021 1099-R reflects these 2 payments and has the decedent's social security number on the 1099-R.

This seems correct to me.  Usually pension payments paid in one month are payments for the previous month.  Thus the January 2021 payment was for Dec 2020, and the Feb 2021 payment was for Jan 2021.  It is not unusual for a pension plan to pay for an entire month provided the recipient was alive for at least 1 day in that month.  This is likely why they received the Feb 2021 payment - because they were alive in Jan 2021.

If this is the case, the 1099-R is correct and the payment amount should be reported on the decedent's final tax return.

I hope this helps

[Lonestar]

Thanks. I appreciate your feedback and I understand where you are coming from re: previous month payout but I'm not sure why, since someone is not working, that a check would be for a previous month. This scenario seems it would create timing issues (for tax returns) with income for a previous year (say Dec 2020) that was not received or accounted for in that year. It was received in Jan 2021, so seems like it should be 2021 income. The second payment was received Feb 2021 and is also 2021 income but she was not alive for that payment. It's probably more beneficial to account for both for her last return, as 'she' will get all the taxes back due to the low income number. I'm all for that, I just need to be sure that is correct.  I suppose I need to contact the Plan people directly but I thought I'd start here. Thanks again!

[JulieS]

It is very common to have a deceased person receive income after death. It is called Income in Respect of a Decedent (IRD). 

Income reported in the name and Social Security number of a deceased person can be reported on their final tax return, even if it was received after death. 

You are correct that can sometimes cause timing issues. If a taxpayer dies on December 29, 2020, the 2020 tax return will be the final 1040 for that taxpayer. Income received in 2021 would be reported on the estate return, or directly by the beneficiaries. 

So to summarize, all 2021 income reported in the name of your relative can be reported on their 2021 final tax return. 

If additional tax forms or income are received in 2022, you should report and /or deposit them in the estate. 

If there is no estate, or if the estate has been closed, the beneficiaries should report the income as if it is their own income.

[Lonestar]

Thanks for these additional pieces to the puzzle, Julie!