401k to inherited IRA

Submitted by Dan Lohmar on Thu, 2019-11-14 04:05

Is it possible for a beneficiary of a 401(k) to roll it into an inherited IRA? I would assume the 401(k) plan would have to allow such a rollover, or does it? In the event this can happen, how would the inherited IRA be titled?

In the event a non-spousal beneficiary must, or does, leave the funds in a 401(k), what is the normal distribution period? Or does it rely entirely on what the plan will allow?

Thank you.



Submitted by Alan - IRA critic on Thu, 2019-11-14 04:51

  • IRS rules require that a 401k plan must offer a desigated beneficiary (an individual)  or a qualified trust to do a direct rollover to an inherited IRA or inherited Roth IRA. The inherited IRA would be titled to include the name of the beneficiary and the name of the decedent. 
  • If the direct rollover is done by the end of the year following the year of death, the beneficiary can take life expectancy RMDs. If not done by this deadline, the 401k plan might require the use of the 5 year rule if the participant passed prior to the RBD, or might allow the beneficiar to elect life expectancy RMDs.
  • If the estate or a non qualified trust is the 401k beneficiary, a direct rollover to an inherited IRA is not permitted. The plan would usually require a lump sum distribution to be made to the estate or trust. 
  • If the 401k with an individual beneficiary is left in place, the plan may offer life expectancy RMDs to the beneficiary, but does not have to. If there are multiple individual beneficiaries, the age of the oldest will determine the life expectancy RMD.

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