deceased spouse’s 401k

Submitted by Richard Stumpf on Thu, 2017-01-05 19:15

Client died at 47 with a large IRA account. Spouse is 50. What is the process for spouse to set up inherited IRA? Does it get changed at the 401k before rolling to an inherited IRA, or can I just roll it to an inherited IRA directly?



Submitted by Alan - IRA critic on Thu, 2017-01-05 21:30

  • The death certificate and other required papers including surviving spouse’s contact info and SSN would have to be filed with the 401k administrator before they would issue a direct rollover. Any direct rollovers will be reported under the beneficiary’s SSN on the 1099R. Once done, you could have the inherited IRA custodian handle the direct rollover request. The distribution check should be made out showing surviving spouse’s inherited IRA account included as payee. Since most of these rollovers are to the spouse’s OWN IRA, caution should be exercised to avoid any confusion.
  • If there was any highly appreciated employer stock in the plan, NUA could also be considered. If there was any after tax contributions in the plan, those should be sent to an inherited Roth IRA as part of a split distribution per Notice 2014-54. And of course, any Roth 401k balance would also go to an inherited Roth IRA. RMDs do not start on these inherited accounts until the year client would have reached 70.5, but if she is taking distributions earlier, perhaps she should roll over to her own IRAs at 59.5.

Submitted by Richard Stumpf on Fri, 2017-01-06 22:38

Thanks.  Don’t I recall that the money has to be changed to the “Inherited”  classification at the 401k BEFORE we can roll it to the inherited IRA?

Submitted by Alan - IRA critic on Fri, 2017-01-06 23:56

Yes, that is correct. The death code on the 1099R (code 4) that is shown for the direct rollover to an inherited IRA cannot be used unless the account is titled as an inherited account.

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