Can widow make husband’s 401-k into HIS IRA?
Can widow make husband’s 401-k into HIS IRA? Widow is 51. Husband died last month at 54. He leaves a $77,000 401-k. She is the beneficiary and wants to move it out of 401-k into an IRA.
I know she could take it as an inherited IRA now. Taken as an inherited IRA this would force her to take RMD’s at his attained age of 70 ½, three years earlier that her 70 ½ age. This would make for higher RMD’s for her children should they inherit an inherited IRA. Both events limit choices.
She could take it as her own IRA, now using her age for all calculations.
My questions are: How does she make this soon to be inherited 401-k into HIS IRA now, so she could take a [10% Fed government] penalty-free withdrawal if she wanted to do so at HIS 59 ½ attained age [3 years earlier that if she simply rolled it over into HER IRA]? Then she can still at her age of 59 ½ roll it into her IRA. Correct?
Company paperwork only mentions it becoming HER IRA and does not mention that this IRA set-up – in HIS name – is even a possibility. Is there any IRS code that can enlighten them and me?
Permalink Submitted by Alan Spross on Tue, 2011-11-29 20:17
She should do a direct transfer to an inherited IRA showing her name as beneficiary and his as the decedent. She can then take penalty free distributions if she needs them, but no RMDs are required because she would reach 59.5 before HE WOULD HAVE reached 70.5. At 59.5 she should roll the inherited IRA over to her own IRA. Her RMDs then would not start until she reached 70.5. The rollover to an inherited IRA was approved by the IRS in PLR 2004-50057.
Your post is mostly correct, except the portion on the kids RMDs were she to pass. If she passes while the IRS is still inherited, her named beneficiaries are treated as if she was the owner until such time she would have had to start RMDs. But she will roll it over to her own IRA long before that. So as long as she remembers to roll the inherited IRA to her own IRA before reaching 68 (preferably at 59.5), her beneficiaries will be treated as designated beneficiaries and not as successor beneficiaries. In other words, they would get a full stretch for their RMDs.
Permalink Submitted by Harve Senter on Tue, 2011-11-29 22:03
Alan, as always, your response is thoughtful, quick and appreciated. Thank you.