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  1. #11
    Join Date
    Nov 2013
    Posts
    6,612

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    How much money are we talking about?

    If your mother would have turned 70 1/2 this year the RMD is based on the total value of all her retirement accounts on Dec. 31, 1918. That value divided by 27.4 is the amount of the RMD for the year 2019. You can take the distribution for your mother's estate and pay the tax on it and be done with it.

    You inherit the remainder of the retirement account. You would not have to take RMD until the year you turn 70 1/2.

    If the current plan administrator is making money for their participants, then you should leave the money with them. Moving the money into an IRA that is self-directed is a gamble if you are not well versed in investments. If you have your own 401K or SEP or any other plan that is doing well, you can always move the money into it.

  2. #12
    Join Date
    Oct 2006
    Posts
    15,856

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    Quote Quoting budwad
    View Post
    How much money are we talking about?

    If your mother would have turned 70 1/2 this year the RMD is based on the total value of all her retirement accounts on Dec. 31, 1918. That value divided by 27.4 is the amount of the RMD for the year 2019. You can take the distribution for your mother's estate and pay the tax on it and be done with it.

    You inherit the remainder of the retirement account. You would not have to take RMD until the year you turn 70 1/2.

    If the current plan administrator is making money for their participants, then you should leave the money with them. Moving the money into an IRA that is self-directed is a gamble if you are not well versed in investments. If you have your own 401K or SEP or any other plan that is doing well, you can always move the money into it.
    Who suggested a self directed IRA? It certainly wasn't me. I just suggested rolling it over into an IRA to get it out of the hands of the broker who apparently doesn't know what they are doing. From my experience that is the only viable way to solve the problem.

  3. #13
    Join Date
    Jan 2019
    Location
    Pugetopolis
    Posts
    105

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    Quote Quoting pacnw
    View Post
    I called today and got no specific as far as the type of account.

    I was told that because my mother would be 70 1/2 this year, she would have been required to take RMDs and therefore I am required to do so.
    Correct, the clock has started

    https://www.forbes.com/sites/davidra.../#68cc62d2b7fe

    Quote Quoting llworking
    View Post
    Once the money is out of their hands, then your problem with them being wrong is ended.
    In this case the IRA custodian is fully correct

    Regardless of the age of the beneficiaries, once a non-spousal IRA is inherited, draw down must start. There is no opportunity to park the money until the beneficiary turns 70 1/2.

  4. #14
    Join Date
    Oct 2019
    Posts
    22

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    Tax hit is the same if I take a lump sum or just RMDs percentage wise, correct?

  5. #15
    Join Date
    Jan 2019
    Location
    Pugetopolis
    Posts
    105

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    In answer to your above question. No, your tax liability for each years distribution is dependent on your other income and write-offs for each individual year.

    Quote Quoting budwad
    View Post

    If your mother would have turned 70 1/2 this year the RMD is based on the total value of all her retirement accounts on Dec. 31, 1918. That value divided by 27.4 is the amount of the RMD for the year 2019. You can take the distribution for your mother's estate and pay the tax on it and be done with it.

    You inherit the remainder of the retirement account. You would not have to take RMD until the year you turn 70 1/2.
    Not correct

  6. #16
    Join Date
    Nov 2013
    Posts
    6,612

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    You are not correct. A beneficiary of a retirement account upon death can take ownership of the account. From that point forward, it is as if the beneficiary owned the account all along. They don['t have to take distributions until the year they reach 70 1/2.

  7. #17
    Join Date
    Oct 2006
    Posts
    15,856

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    Quote Quoting pacnw
    View Post
    Tax hit is the same if I take a lump sum or just RMDs percentage wise, correct?
    Ok, please understand that our federal tax system is a stairstep system therefore no, a lump sum is generally going to have a much bigger tax bite than an RMD.

  8. #18
    Join Date
    Jan 2019
    Location
    Pugetopolis
    Posts
    105

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    Quote Quoting budwad
    View Post
    You are not correct. A beneficiary of a retirement account upon death can take ownership of the account. From that point forward, it is as if the beneficiary owned the account all along. They don['t have to take distributions until the year they reach 70 1/2.
    Source?


    It is as I stated
    https://www.irs.gov/retirement-plans...-beneficiaries

    https://www.google.com/amp/s/www.foo...ete-guide.aspx

  9. #19
    Join Date
    Nov 2013
    Posts
    6,612

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    Quote Quoting MaltbyMark
    View Post
    Source?
    Ok, I think you are correct that next year 2020 OP is required to start taking MRD as a non-spouse beneficiary according to IRS using table 1.

    Other designated beneficiary.
    Use the life expectancy listed in the table next to the beneficiary's age as of his or her birthday in the year following the year of the owner's death. Reduce the life expectancy by one for each year since the year following the owner's death. As discussed in Death of a beneficiary , earlier, if the designated beneficiary dies before his or her portion of the account is fully distributed, continue to use the designated beneficiary's remaining life expectancy to determine the distribution period; don't use the life expectancy of any subsequent beneficiary.



    Example.

    Your father died in 2018. You are the designated beneficiary of your father's traditional IRA. You are 53 years old in 2019, which is the year following your father's death. You use Table I and see that your life expectancy in 2019 is 31.4. If the IRA was worth $100,000 at the end of 2018, your required minimum distribution for 2019 would be $3,185 ($100,000 31.4). If the value of the IRA at the end of 2019 was again $100,000, your required minimum distribution for 2020 would be $3,289 ($100,000 30.4 (31.4 reduced by 1, which is the number of years following the year after your father's death in 2018)).
    https://www.irs.gov/publications/p59...link1000230768

  10. #20
    Join Date
    Jan 2011
    Posts
    308

    Default Re: 401k from My Mother After She Passed (Inherited 401k )

    Quote Quoting pacnw
    View Post
    Tax hit is the same if I take a lump sum or just RMDs percentage wise, correct?
    Not necessarily. If you're not contributing the max you can now to plans like a Health Savings Account or employer 401k, you could offset what you're forced to withdraw from the inherited IRA by increasing contributions to those plans.

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