NUA for spousal beneficiary of 401(k)?
Hi,
I inherited a 401(k) from my husband who passed away. There is company stock in it from his former employer. If I distribute the entire account, does the employer stock portion qualify for NUA? Regarding NUA, does it matter if the stock was from his vs. my employer?
Thank you for your help.
Permalink Submitted by Alan - IRA critic on Wed, 2020-01-22 03:16
The employer stock that he owned and you inherited qualifies for NUA with his death being the triggering event that qualifies you to distribute the shares as part of a qualified lump sum distribution for NUA. In essence, you are treated as the employee whose 401k acquired the shares. You just need to be sure that the taxable cost basis is low enough to warrant distribution of the shares for NUA purposes rather than rolling the entire plan balance to your own IRA (inherited IRA if you are under 59.5). If you have an RMD obligation from this account, you must complete the LSD before your RMD becomes an intervening distribution that eliminates the chance to do a qualified LSD. If there are RMD involved, either you husband’s year of death RMD or your first beneficiary RMD, there are critical timing requirements. If you have questions about this please advise.
Permalink Submitted by chris erickson on Wed, 2020-01-22 04:10
Yes, I understand. We will find out the cost basis. We were only going to consider NUA if it applied here and if the cost basis is low enough. Thanks.