Expert: Ed McFarland - 10/6/2005

Question
Do the payroll checks following the death of an employee (vacation, sick, last hours worked) need to be made out to the employee, his/her beneficiary, or to "The Estate of" the employee?

Question ulimately pertains to 401(k) plan as obviously this changes the name of record on the account (after payroll submits their data to provider) and thus making it difficult for the beneficiary to get a distribution.  

Answer
This comes under the heading of Income in Respect of the Decedent. (IRD)

The payroll should be made out to the decedent, there shouldn't be any more 401k contributions, since there will be a death claim by the beneficary.

The procedures get changed and vary from service provider. Talk with them and check the IRS site www.irs.gov for more information.

Good luck