Ripped From the Headlines

D.N. v. U.S., Cite as 106 AFTR 2d 2010-7126, 11/22/2010

The thing about my profession is that you can take the most tragic set of circumstances and see it as an opportunity for tax savings.  D.N is a minor child who is receiving his deceased father's 401(k).  His guardians think that he shouldn't be taxed on the 401(k), because he is not the named beneficiary.  The guardians argue that the named beneficiary should be the one taxed.

Why we ask is the named beneficiary not getting the money ?  The named beneficiary, D.N.'s mother is legally precluded from collecting the funds because she is the "slayer" of D.N.'s father.  D.N.'s representatives argue that Mommy Dearest did, in fact, benefit from her status as beneficiary:

D.N., relying on Darby, argues that his mother should be treated as the distributee of the funds from his father's 401(k) plan because she was originally entitled to the proceeds and because she received a benefit from the plan by using her claim to the funds as a bargaining chip in criminal plea negotiations. She ultimately pled guilty to first-degree manslaughter with intent, a lesser offense than the murder charge originally pursued by the prosecutor. The prosecutor attested that her claim to the 401(k) funds played a role in the negotiations.

Doesn't this have the makings of a Law and Order Episode ?

The Court found for the government on this one.  It seems to me that D.N.'s guardians might have been wasting his money.  Even if they won, wouldn't there likely be transferee liability assuming Mom isn't making enough in the prison laundry to pay the taxes on the 401(k) distributions ?  I'll mention that to Jack McCoy next time I see him.