inheriting spouse’s 401k
What options are available to a spouse who inherits a 401k account? I assume that they can put it into a beneficiary IRA. Is that right? Can the money move directly from the deceased person’s account to a beneficiary IRA at another custodian, or would it first have to be put into a ben. IRA account at the 401k company?
Thanks!
Permalink Submitted by mk foss on Thu, 2011-03-24 21:55
The spouse beneficiary of a 401k plan has a number of options:
1. It can be rolled to a beneficiary IRA
2. It can be rolled to a rollover IRA that’s treated as if the plan benefits had always beloged to that surviving spouse.
3. It can be rolled to a 401k plan, 403b plan or any type of qualified retirement vehicle that the spouse participates in.
Inherited IRAs cannot be converted to Roth IRAs but an IRA rolled over by an surviving spouse can be converted.
Generally the 401k company will not have a beneficiary IRA option in connection with the 401k plan. They could put it into a separte account for the survivor.
Permalink Submitted by Alan Spross on Thu, 2011-03-24 23:25
Don’t forget to check on any highly appreciated employer shares in the plan. The employee death is a triggering event that makes NUA a possibility for the surviving spouse if a qualified LSD is completed. This should be considered in coordination with the other options mentioned.
Permalink Submitted by Jason Frank on Fri, 2011-03-25 00:57
Thanks a lot for the help!