Spousal inherited 401(k) – avoid RMD with IRA rollover?

Submitted by R Gibbons on Sat, 2016-09-17 19:36

My mother is now 65 and inherited my father’s 401(k) 2 years ago and kept the 401(k) account. This is the year that my father would have turned 70 1/2 and been required to take an RMD. The plan is advising my mother that she must take the RMD this year. I can see from the amount of the RMD that the plan is treating her as a beneficiary and not as an owner. Can she avoid this RMD by rolling over the 401(k) into her own IRA this year? Or would she be required to take the RMD from the 401(k) this year, but then not have to take an RMD from her IRA until she herself is 70 1/2? I could not find a clear answer in the IRS publications. Thank you.



Submitted by Alan - IRA critic on Sat, 2016-09-17 22:02

  • The latter. Unlike an IRA, a qualified plan cannot be “assumed” as the owner by a sole surviving spouse. Therefore, in order to avoid a 2016 beneficiary RMD on the 401k, the IRA rollover would have had to be completed prior to 2016. She cannot avoid this beneficiary RMD now, but if she completes the direct rollover to her own IRA she not have another RMD on this amount until 70.5. And since she is over 59.5 she can take any distributions she needs without a penalty.
  • Before ordering the rollover, she needs to determine if there is any after tax balance in the plan. If so, she could split the direct rollover with the after tax amount going to a Roth IRA tax free, and pre tax amount to a TIRA. Further, if there is any highly appreciated employer shares in the plan, she might consider NUA options. A taxable distribution to her of the shares would also satisfy her beneficiary RMD for this year.


Submitted by R Gibbons on Mon, 2016-09-19 03:07

i appreciate the response



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