401k to IRA
Hello and thank you in advance for your help. My step dad just passed away he was 42 years old. My mom who is the primary beneficary of his 401k is 51. My question is would it be best for my mom to move the 401k to an IRA and keep it titled in my step dad’s name but still naming her as beneficary? Allowing her to use the 72t and streach the growth over a much longer period of time being that she was 9 years his senoir.
Permalink Submitted by Alan Spross on Thu, 2012-03-15 18:50
Yes, she should roll the inherited plan over to an inherited IRA. With an inherited IRA she can:
1) Take distributions as needed without the early withdrawal penalty, since all distributions will be coded as death distributions.
2) She will have no RMD until your step dad would have reached 70.5.
3) She could name you (or other) as her successor beneficiary on the IRA, but you would be treated as a designated beneficiary if something happened to her before she was required to start RMDs. That means as beneficiary you could use your own age to determine your RMD.
When she reaches 59.5, she could assume ownership of the IRA and still take distributions without penalty, but her RMDs would have to start at 70.5. While she may well need the money long before then, if she kept the IRA in inherited form, she would not need to start RMDs until she was 79.