401k rollover to surviving spouse

Submitted by Richard Stumpf on Wed, 2015-10-07 22:21

Husband died Aug 2014. Owner of company. He was 68 at time of death. Wife turned 71 in June, 2015. 401k is forcing her to roll out. I’m thinking that I should roll it to an inherited IRA instead of a spousal IRA. Reason? Since she was 70.5 in 2014, I’m thinking she should have taken an RMD by April 1, 2015, which she didn’t do, and she has another RMD due by the end of 2015. Is that correct?

Also, the form provided by the 401k plan only listed direct rollover to a spousal IRA for the spouse, and direct rollover to an inherited IRA for a non-spouse. But I can roll to an inherited IRA for a spouse as well, can I not?

Anything else I need to watch out for?

Thanks.



Submitted by Alan - IRA critic on Wed, 2015-10-07 23:24

  • There is no RMD for 2014 because 401k plan owner passed in that year prior to his RBD. Wife then has 401k re titled as inherited in 2015 but there is still no RMD due for 2015 because a sole spousal beneficiary does not have to start RMDs until the deceased spouse would have reached 70.5.  Because the 401k is forcing a rollout she cannot wait the extra couple years to avoid RMDs, but since 2015 requires no RMD for her as beneficiary, the plan should allow the entire balance to be rolled into her own IRA. This balance will then be included in her 12/31/2015 IRA balance and generate an increased RMD for 2016.
  • Sometimes getting this done is troublesome, but as you said she also has the right to have the inherited 401k directly rolled to an INHERITED IRA, where she could still delay RMDs until the year her husband would have reached 70.5. Then she could roll it over to her own IRA during that year and her RMD for that entire year would be as owner under the Uniform Table. May not be worth the hassle unless other tax planning for her would benefit from less taxable income for the next year.

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