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inherited 401k

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  • inherited 401k

    My wife will be inheriting her portion of her mothers 401k.  I am very confused about our options.

    1.  401K is a traditional 401k.  No distributions were required, she passed in her 50s.   Can we roll my wifes portion into her existing traditional IRA?  I know that this is plan dependent.

    2.  IF we can roll into traditional IRA, does the money grow tax deferred until my wife starts to take distributions?

    Or, am I totally wrong/lost and we have to take a distribution now, which will be taxed?


    Thanks guys.


  • #2
    Your options depend upon what the plan document stipulates. She may be required to take it out in a lump sum, stretch over 5 years, or over her life expectancy. If she is allowed to roll into an IRA, it must be kept separate in a separate IRA from her existing IRA. She also may be allowed to leave the money in the 401k. She MUST decide what to do by 12/31/17 or the plan will decide for her. I cannot stress enough the importance of getting qualified professional advice before she does anything - inherited retirement plans can be very tricky.

    My condolences on the loss of your mother-in-law.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      You'd think it should be simple enough. At least one can bypass probate if listed as a beneficiary. Not to be morbid but I think I'll ask my mom about her TSP. She has told me that me and my sibling are the beneficiaries 50/50 split.