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  1. #1
    Join Date
    Oct 2019
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    18

    Question 401k from My Mother After She Passed (Inherited 401k )

    My mother passed 12/2018 at 70yrs 10 months and 28 days(so over the 70 1/2 threasholdas I understand it).
    She had a 401K that I was the beneficiary of.
    She had NOT started any distributions. The company contacted me and I rolled it into a 401K in my name, there is no mention of "inherited" anywhere on the paperwork I have.
    They sent me a form to start RMDs, but I was under the impression that I did not have to take the money. Then I read the quoted post below and now I don't know what is correct.
    I am 50 years old.

    First, do I need to take RMDs or a lump sum within 5 years?
    What are the tax implications?

    Mr. Knowitall responded like this to an IRA question, is this relevant to my situation? :
    " You do not pay income taxes when you inherit a traditional IRA, but will pay income taxes when money is disbursed to you from the IRA.

    If you inherit a traditional IRA and you are under the age of 70-1/2, you have three options:

    1. Cash out the IRA, and pay income tax on the money.
    2. Place the IRA into a new inherited IRA account and make the five-year election, then withdraw the funds over the five year period, paying taxes on the money that you withdraw.
    3. Roll the IRA over into your own IRA (a new IRA or existing IRA) and then, when you ultimately take distributions, pay income taxes on those distributions.

    As the IRA is funded with pre-tax dollars, you will pay taxes on the money when it is disbursed, but you can choose the option that best serves your needs."

  2. #2
    Join Date
    Sep 2010
    Posts
    19,291

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

    Your post is confusing. You can't "roll into an 401k in your name." Your options were to leave the money in the 401k plan it was in (I suspect that has happened, they just noted you as the owner, nothing was "rolled over). The other options were an "inherited IRA" or a rollover into your own IRA. Assuming the first case, at your age and seeing how the the account holder was your mother and not your spouse, I don't see that you are required to take distributions, but you can do so without the 10% penalty that you would have been subject to in your own plans. You do owe tax on a 401k on your distributions.

  3. #3
    Join Date
    Oct 2019
    Posts
    18

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

    Quote Quoting flyingron
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    Your post is confusing. You can't "roll into an 401k in your name." Your options were to leave the money in the 401k plan it was in (I suspect that has happened, they just noted you as the owner, nothing was "rolled over). The other options were an "inherited IRA" or a rollover into your own IRA. Assuming the first case, at your age and seeing how the the account holder was your mother and not your spouse, I don't see that you are required to take distributions, but you can do so without the 10% penalty that you would have been subject to in your own plans. You do owe tax on a 401k on your distributions.
    Well, I was specifically told it was a new account in my name and that it was a 401K.

    Quote from the paperwork;
    " This statement is to confirm the money that was recently transferred to you in the XXXXX Retirement Savings Plan.

    Based upon the participant's beneficiary designations, you were entitled to 100% of X'x vested account balance. As a result the balance was transferred to an account established in your name."

    I guess the paperwork is vague.

    I will contact them to get more details.

    Copied from the online account:

    Qualified 401(k) Retirement Savings Plan (Beneficiary)

  4. #4
    Join Date
    Nov 2013
    Posts
    6,526

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

    As a named beneficiary of a retirement account that is payable on death, you have no MRD until you reach the year that you turn 70 1/2.

  5. #5
    Join Date
    Oct 2019
    Posts
    18

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

    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.

  6. #6
    Join Date
    Oct 2006
    Posts
    15,744

    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.
    You really should roll the funds over into an IRA in your own name. Get the money gone from the original 401k broker.

  7. #7
    Join Date
    Oct 2019
    Posts
    18

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

    Quote Quoting llworking
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    You really should roll the funds over into an IRA in your own name. Get the money gone from the original 401k broker.
    Well, I thought that was done initially.

    Obviously there was a communication issue.

    This company has been a nightmare to deal with and I have removed all funds from their businesses and told them why as I have been doing it. To them it may be small dollars, but to the average person it is a substantial amount. They have not cared, no reaction and no contact afterwards.

  8. #8
    Join Date
    Sep 2010
    Posts
    19,291

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

    Quote Quoting llworking
    View Post
    You really should roll the funds over into an IRA in your own name. Get the money gone from the original 401k broker.
    That's not a univerally good idea. If it is still in the original 401k and is well performing, it may be advantageous to leave it there as it allows you flexibility that either an inherited or regular IRA will not.

    Don't forget you owe the tax on the amount if you "just removed the funds." If you properly rolled it over into an IRA or inherited IRA, then you just carry on.

    The broker is almost certainly wrong. The fact that you are young and not the spouse of the plan holder obviates the need for RMD.

  9. #9
    Join Date
    Oct 2019
    Posts
    18

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

    Quote Quoting flyingron
    View Post
    That's not a univerally good idea. If it is still in the original 401k and is well performing, it may be advantageous to leave it there as it allows you flexibility that either an inherited or regular IRA will not.

    Don't forget you owe the tax on the amount if you "just removed the funds." If you properly rolled it over into an IRA or inherited IRA, then you just carry on.

    The broker is almost certainly wrong. The fact that you are young and not the spouse of the plan holder obviates the need for RMD.
    Unfortunately they are requiring RMDs, both verbally with them yesterday and via mail and online in my account. As stated, these people have been a nightmare, vague, possibly dishonest, definitely contradictory and now seems like maybe unknowing.

    Who should I see to get this figured out, as in what professional? Tax attorney, CPA, investment person?

  10. #10
    Join Date
    Oct 2006
    Posts
    15,744

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

    Quote Quoting pacnw
    View Post
    Unfortunately they are requiring RMDs, both verbally with them yesterday and via mail and online in my account. As stated, these people have been a nightmare, vague, possibly dishonest, definitely contradictory and now seems like maybe unknowing.

    Who should I see to get this figured out, as in what professional? Tax attorney, CPA, investment person?
    If they are insisting on the RMDs then I can tell you, from experience, that they are not going to budge. I have seen this happen with clients of mine. I have one client that has been going through a nightmare with the brokerage firm she works with for over two years now. That is part of the reason why I am recommending that you roll the money into an IRA of your own. Once the money is out of their hands, then your problem with them being wrong is ended.

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