death of spouse
My husband died last month. He has several retirement accounts. After contacting the different custodians I am getting different answers as to how the transition works. Some tell me it is a distribution. Some tell me it is a transfer. Some tell me I have to open up an inherited IRA, 401k, 401k roth, roth ira, etc. So I am totaly confused at this point. HELP!!!
Permalink Submitted by tomd37 on Tue, 2012-06-26 20:21
Very sorry for your loss. You will get some excellent replies here from very knowledgable people. How old was your husband, how old are you, was he taking required minimum distributions and if so has the one for this year been taken? What types of accounts are involved here (e.g. traditional or Roth IRAs, 401k, etc.)? Don’t depend on everything you hear from the different custodians as some of the representatives fielding questions don’t know or understand tax rules and law. I suspect Alan S. (Alan-oniras) will respond and he is an expert here.
Tom D.
Permalink Submitted by Rose Robins on Tue, 2012-06-26 20:25
My husband was 66 year old. I am 65. He was not taking required minimum distributions. Rose
Permalink Submitted by Alan Spross on Tue, 2012-06-26 21:05
Based on the ages you indicated, and footnoted exceptions below, you should plan to roll all these inherited plans into your own IRA. If you do not have an IRA now, you need to open one in your name to receive these rollovers. There will be no tax due on these rollovers, and you do not have to worry about RMDs until the year you reach 70.5. After these balances are all in your IRA account, you can decide whether or not you should convert any portion to a Roth IRA. That decision can wait until later on.
You will need to submit a copy of the death certificate and complete required paperwork for each plan. You need to consider whether you should retain assistance to help you with this or you understand enough to do it yourself. You can get some assistance from your IRA custodian depending on who you use. Be very careful in completing forms. For employer plans such a a 401k, you should request a direct rollover to avoid any tax withholding.
Possible exceptions:
1) Determine from the 401k plan whether your husband has appreciated employer stock shares in his 401k or other plan you inherited. If so, you may want to consider NUA (net unrealized appreciation) for these shares. For NUA, you would NOT roll the shares to an IRA, but to a taxable brokerage account instead. NUA is usually best only if the cost basis of the shares is under 30% of their current value. If you think you have NUA potential, then you should definitely get some professional assistance because the rules are complex.
2) Determine from the plan if there are after tax contributions in the plan. If there is a large enough balance of after tax contributions, you may want to consider ways to roll the after tax amount to a Roth IRA with the rest going to a traditional IRA.
If neither of these 2 exceptions apply, the complexity is much reduced.
Be sure to name your own successor beneficiary on each plan that you will continue. There is no need for you to continue to maintain these accounts as inherited unless you need some time to determine what to do about NUA or after tax contributions in the 401k. Once the rollovers are complete, your IRAs will be owned by you rather than showing you as the beneficiary.
You may have more questions, and if so feel free to post them.
Permalink Submitted by mk foss on Tue, 2012-06-26 21:19
It is less complicated because your husband was over 59.5 and not taking required minimum distributions. You can rollover his Roth IRA (or the Roth portion of a 401(k)) to an existing or new Roth IRA in your name. All other retirement accounts can be rolled over to an existing or new IRA in your name.
This assumes that you are the beneficiary of everything and that you have the same beneficiaries for your accounts as his. There are reasons why some individuals may use an inherited IRA instead of the surviving spouse’s IRA – but those reasons ordinarily do not apply given your age and your husband’s age.
Good luck,
Permalink Submitted by Rose Robins on Tue, 2012-06-26 21:38
Alan
We only had 2 employees in the 401k profit sharing plan so I am not sure there is any appreciated value to the stock.
Rose
Permalink Submitted by Rose Robins on Tue, 2012-06-26 21:42
Mary Kay
I am the beneficiary on all his accounts and he was the beneficiary on all my accounts.
Some of the custodians are saying I have to open a new account instead of using mine. There is one account that he has Roth IRA where I do not have an account with them. They say I have to take a distribution and then open an account in my name if I wish to stay with them. That is the one account that I am concerned about.
Rose
Permalink Submitted by Alan Spross on Tue, 2012-06-26 23:26
There is no problem taking a distribution and rolling the proceeds over to your own IRA. If you take the money out of the inherited account, be sure to contribute it to your own Roth IRA within 60 days. Be sure to roll the traditional distribution to a traditional and the Roth to a Roth. The only two errors you can make that present problems is mistakenly taking a distribution from the inherited Roth and putting it in your traditional IRA, or not re contributing the distributions within 60 days.
You would just report these as rollovers on your tax return and there will be no current taxes due.