If an individual pension plan held with a life insurer or a trust company includes a designated beneficiary, that pension plan is not part of the decedent’s estate. Conversely, if the plan does not have a designated beneficiary, the amounts payable under the plan will form part of the estate of the deceased.
A surviving spouse who is the beneficiary of an individual pension plan must roll over the funds from that plan into their own pension plan to avoid paying any taxes. Consequently, if the surviving spouse cashes out this plan, they may be liable for all taxes payable on those assets.