401(k) proceeds inherited from a friend

Hello. I have a colleague that inherited a portion of a friend’s 401(k). He has a check in hand for his portion, but also expects to receive another amount over the next two years. To avoid the taxation of these dollars, he is wondering if he can deposit the check into an inherited IRA within 60 days of the check being issued. He was told by one custodian that this was not possible. Any thoughts? Thank you!



No, the custodian is correct. As a non spouse beneficiary, any distribution check payable to him is fully taxable and not eligible for rollover. Did he request a distribution to himself?  If he did not intend to spend the money right away, he should have opened an inherited IRA and done a direct rollover to that inherited IRA. 

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