401k Death Benefit Form

Submitted by Sandra Owens on Wed, 2017-07-12 18:14

My client died earlier this year and left his IRA 50/50 to both his son and daughter. We opened an inherited ira for each of them and transferred their share.

We just discovered the same client had a 401k account and again he left the balance 50/50 to both his son and daughter. My question is: Can we transfer the balance due each child from the 401k account to their existing inherited IRA?



Submitted by Alan - IRA critic on Wed, 2017-07-12 18:28

  • Yes, direct rollovers to the existing inherited IRAs can be done as long as the RMD divisors will be the same. They would differ if the client inherited his IRA instead of owning it.
  • That said, the 401k might present different options of interest that should be investigated. For example, there might be an after tax balance that could be rolled to an inherited Roth IRA and even the pre tax balance can be rolled into an inherited Roth for a non spouse beneficiary subject to taxes. Or the 401k might hold appreciated employer shares to which NUA might be applied for that portion. If none of these other options exist or are viable, there is no reason for the direct rollover to go into a newly opened inherited IRA.
  • If client was subject to 401k RMDs, the year of death RMD must be paid to the children and not included in the rollover.

Submitted by Sandra Owens on Wed, 2017-07-12 20:23

Thank you for this information

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