inheriting 401k
Individuals spouse died and the deceased had a 401k. Deceased passed away in 2011 and his wife was beneficiary, wife has not done anything with the 401k, it is still at employer in the name of the deceased, will beneficiary have to do something with account within 5yrs or can it stay in current position indefinitely?
Permalink Submitted by Alan - IRA critic on Thu, 2015-07-30 00:17
Was deceased working when he passed? What was his age at the end of 2011, and wife’s age at the end of 2011?
Permalink Submitted by Don Warnke on Thu, 2015-07-30 12:26
he had become disable and would have been age 59 at the end of 2011. the wife would have been either 58 or 59.
Permalink Submitted by Alan - IRA critic on Thu, 2015-07-30 18:48
He passed prior to the required beginning date, so the first step is to determine from the plan administrator whether this plan has a mandatory 5 year rule. Most do not. If life expectancy is the default method for this plan, then as sole beneficiary the spouse does not have to take a beneficiary RMD until the year he would have reached 70.5. There has been no RMD infraction so far either way. In most cases, she would now roll the death benefit over to her own IRA which she can now tap penalty free because she is over 59.5. If she leaves the money in the plan as a beneficiary, her RMDs will be larger once they begin and her own beneficiary will not get their own stretch when she passes. I would do the rollover ASAP unless she has major creditor problems and lives in a state that does not protect IRAs against creditors.