401k to IRA upon death
Could someone please tell me what options a 68 year old man can do with his wife’s 401k.She died three weeks ago and she was 65.As far as I know he would inherit it(he is the beneficiary) and be able to put it in his own IRA….is this correct?
Permalink Submitted by Alan Spross on Thu, 2007-09-20 20:32
Yes. Te options are to roll it over to his own IRA, or to roll it over to a spousal inherited IRA. Here are the differences:
1) Rollover to own: It becomes part of his IRA from which he would have to start RMDs in two years based on the total balance. If there were any after tax amounts in the 401k, he should take them in cash or file Form 8606 if he rolls them into his IRA.
2) Inherited IRA transfer: An advantage here is that he would not have to take RMDs from the inherited IRA until the year his wife would have turned 70.5. That would provide 3 extra years of RMD deferral on that balance. Same procedure re after tax amounts as above. Depending on the relative IRA balances, this small advantage may not be worth the complexity based on his total circumstances.
Either way, he should immediately change his own beneficiary designations affected by his wife’s passing.