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  • Spousal inheritance of 401k, etc

    I am unfortunately dealing with having to go through my wife's accounts now that she passed. For her old 401k/403b, is it best if I direct her old companies' HR departments to roll the accounts into my current 401k? I want to make sure I do this correctly before filling out any forms.

    For anyone who ever has to go through this, thankfully my wife listed all her accounts with username passwords for me. And where everything was kept. It would've been easier if she canceled her credit cards before she passed, but everything happened a little more suddenly than we thought it would.

  • #2
    So sorry for your loss.
    I don't think you can roll the account to your 401k/403b.
    Inheriting a 401(k) as a Spousal Beneficiary
    If you inherit a 401(k) from your spouse, what you decide to do with it and the subsequent tax impacts may depend largely on your age. If you’re under age 59 1/2, you can do one of three things:
    1. Leave the money in the plan and take distributions.
    If you decide to leave inherited 401(k) funds in the plan, you can take withdrawals from the account without triggering the 10% early withdrawal penalty. You’d still pay regular income tax on any distributions you take. If your spouse was age 70 1/2 or older when they passed away, you would have to take required minimum distributions from the account. Again, there would be no early withdrawal penalty but you would pay income tax on the withdrawals. If they were younger than 70 1/2 when they passed away, you could wait to take RMDs until you turn 70 1/2.
    2. Transfer the funds to an inherited IRA.
    An inherited IRA is an individual retirement account that’s designed to hold rollover funds from an inherited retirement plan, including 401(k)s. You can make withdrawals without triggering an early withdrawal penalty. This kind of account would require you to take minimum distributions but the amount would be based on your own life expectancy, not the amount your spouse would have been required to take.
    3. Transfer the money to your own IRA.
    If you already have an IRA in place you could roll an inherited 401(k) into it with no tax penalty. The catch is that if you’re under age 59 1/2 when you execute the rollover, the withdrawal will be treated like a regular distribution. That means you’ll pay income tax on the full amount, along with the 10% early withdrawal penalty.
    If you’re over age 59 1/2, you won’t have to worry about paying the early withdrawal penalty with any of these options. If your spouse was taking required minimum distributions from their 401(k) when they passed away, you’d have the option to continue taking them or delay taking them until you turn 70 1/2.
    If you’re already 70 1/2 or older, you’d be required to take minimum distributions – regardless of whether you leave the money in the 401(k), transfer it to an inherited IRA or roll it over to your existing IRA.

    Outdated age of RMD's. I think you might be best served leaving it where it is.
    I am guessing you do not want an IRA.
    Subject to correction by others. Intended as a PSA for you.

    I hope you view the suddenness as a blessing for her. Peace be with you and your family.

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    • #3
      Thanks Tim,

      I do not want an IRA (well as long as the backdoor is still allowed). I have to see if my 401k allows rolling IRAs into it; if so that may be the long drawn out path.
      It was a rough month of hospital/home/hospital but she was peaceful when she passed.

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      • #4
        Sorry for your loss, billy .

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        • #5
          My sincere condolences. Hard to imagine a worse time to deal with finances than when grieving. I more or less agree with Tim. However, I do not recall your situation with kids. If you have them, another option is to disclaim the 401k to the kids as contingent beneficiaries. They have to withdraw within 10 years, but their tax rate likely will be lower than yours.

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          • #6
            maybe I had this in the back of my mind (#2) https://www.kiplinger.com/slideshow/...ask/index.html It was written in 2019 so i dont know if rules have changed since then. Looks like I'll be calling the plans also to confirm one way or another, but I don't always trust their customer reps.

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            • #7
              Billy

              My deepest condolences on your loss. I am so sorry to heat about it.

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              • #8
                Sorry for your loss and needing to deal with finances during this time.

                Hopefully in-service rollover to your 401k is permissible.

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                • #9
                  Originally posted by billy View Post
                  maybe I had this in the back of my mind (#2) https://www.kiplinger.com/slideshow/...ask/index.html It was written in 2019 so i dont know if rules have changed since then. Looks like I'll be calling the plans also to confirm one way or another, but I don't always trust their customer reps.
                  My condolences on your loss. I hope that transfer to your own 401k plan is an option for you. My experience with Fidelity and TDA is that their retirement departments provide better and more accurate information than the general 800# CSR. So ask for the retirement department for whoever handles yours and hers plans.

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                  • #10
                    Originally posted by billy View Post
                    I am unfortunately dealing with having to go through my wife's accounts now that she passed. For her old 401k/403b, is it best if I direct her old companies' HR departments to roll the accounts into my current 401k? I want to make sure I do this correctly before filling out any forms.

                    For anyone who ever has to go through this, thankfully my wife listed all her accounts with username passwords for me. And where everything was kept. It would've been easier if she canceled her credit cards before she passed, but everything happened a little more suddenly than we thought it would.
                    Really sorry to hear of your loss.

                    I recall you must be careful using your wife's login info to access her online accounts. If in trust or joint you are ok, but if it's alone, like an IRA, I believe the proper thing to do is notify the custodian of her passing and follow their instructions. Unauthorized access of your spouse's account is still unauthorized. When my parents died their accounts were immediately frozen. This is to protect you as much as anyone else from fraud or phishing attacks, and them from charges of negligence.
                    Last edited by FIREshrink; 12-21-2021, 07:38 AM.

                    Comment


                    • #11
                      Regarding the security, and different accounts.
                      This can be very problematic. Some legal and some with due to the institution. Sometimes IF she opened the account, it is only in her name (SS#) even though the intent was joint ownership. You may have been added as an authorized user and not as a joint owner. Be careful of mentioning her passing. Boom, access and/or services shut down.
                      Autopays and even utilities (water, gas, electric, cable, Sam’s) all can be impacted.
                      All utilities at a property we own are in the name of a deceased relative but paid out of a different account. Cable for our house was in spouses name.
                      Powers of attorney and many authorized accesses cease at death. With security access requiring text or email verification there are many ways to get tripped up. Yes, cell service has a primary owner. I suggest you check the online access first and then the phone customer service. Get the info and access you need.
                      Sorry for the long post. There is more possibilities than closing a few credit cards. If they ask for your wife’s last four SS# or to speak to the wife, , you know the “ownership” from their perspective.

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                      • #12
                        Dear billy - I am so very sorry for your and your family’s loss and pray you have many wonderful memories to sustain you as you go through life without her.

                        I would recommend consulting with an estate attorney and/or your CPA before making any decisions. One or both will be able to help you make the appropriate choices based on your personal and specific situation.
                        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                        • #13
                          Thank you all

                          I already transferred the electric, that was no issue.

                          Vanguard rep was helpful for the roth--> roth and changing our joint account to a new single one (supposedly with half the step up basis)- just need to fill out some forms

                          The 401k Ill ask my cpa about also, not sure if he knows it specifically

                          Cable/internet may be the biggest mess up in this whole thing. Im afraid of them changing everything up- it may be best to just continue it as is since its on autopay with my bank account

                          Also had my jobs payroll mess up by paying me while on leave, so now I have to write them a check for the net pay I received so that it doesnt mess up my w2, although it was all their mistake.

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                          • #14
                            "Cable/internet may be the biggest mess up in this whole thing. Im afraid of them changing everything up- it may be best to just continue it as is since its on autopay with my bank account"
                            I changed the name online. Then had to go into the comcast store and show ID to change the service to the address to me. After that, it was easy. They don't rely on the release of any kind. No change in service or the "deal" your plan is on.

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                            • #15
                              Originally posted by billy View Post
                              Cable/internet may be the biggest mess up in this whole thing. Im afraid of them changing everything up- it may be best to just continue it as is since its on autopay with my bank account
                              Cable / internet companies don't care about name as long as they get paid for what they invoice.

                              The time to change would be when they increase their rates, as they do periodically once a year or so.

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