401k inheritance after husbands death

Submitted by Kelly Wilt on Wed, 2023-12-20 15:21

My friend inherited her husbands 401k earlier this year after he passed in January 2023. She rolled it over to a local well known national firm. She was 55 at the time of the rollover. She mentioned last night that her rep wants to see her as there are taxes to be paid. ??????
Her statement is shows a title of:

XXXXXXXXX Trust Co as Cust
FBO (husbands name) IRA
C/O wifes name

In the middle of the front page of the statement it does say Traditional Individual Retirement Account

After her statement about taxes above I’m wondering if the rep thinks she has to make a withdrawal by years end?

If this is set up as an Inherited IRA is she required to take an RMD?

If this is set up as a rollover to her name and she treats it as her own I know that is not the case.

Any help is greatly appreciated. Thanks to all!



Submitted by Alan - IRA critic on Wed, 2023-12-20 16:26

  • The title is a unique format to reflect a beneficiary IRA as it does not clearly state that husband is deceased or that the widow is the beneficiary. Widow should confirm that this is a beneficiary IRA and she should have named her own beneficiary on the inherited IRA. Establishing an inherited IRA by direct rollover is recommended when the spouse is under 59.5 since it allows her to take distributions without penalty.
  • If husband passed prior to his RBD, there is no 2023 RMD and beneficiary RMDs do not start until the year husband would have reached his RMD age. That age is determined by his DOB, which was not indicated.
  • A direct rollover to an inherited IRA is not taxable. Is this “Rep” working for the IRA custodian or the 401k plan? Whatever, he needs to explain his comments about taxes in language that the friend can understand. There should be no taxes due on a direct rollover, or did she receive a distribution that she rolled over herself?  Need more info.

Submitted by Kelly Wilt on Wed, 2023-12-20 16:44

She has no need or desire to make withdrawals prior to 59.5Husbands age was 59. DOB is not known. Rep works for the IRA custodian.  No distribution taken all was rolled over.Disregarding the distributions without penalty, would it not have been the simplest to just roll the account to an IRA in her name and RMDs apply to her age based on her DOB?Or, disregarding the distributions without penalty again, as the account stands in its odd titling, she has RMDS based on his DOB which she would be roughly 69 then vs 73 if the IRA was in her name and she was treating it as her own? 

Submitted by Alan - IRA critic on Wed, 2023-12-20 18:53

GIven their respective ages, her RMDs will be deferred longer by assuming ownership of the inherited IRA. Her RMDs as the owner begin at age 75. RMDs as the beneficiary would begin at his age 75, her age 71. As long as she is totally sure that she will not need any distributions prior to 59.5, she should elect to assume ownership. It’s still not clear what taxes the rep was referring to if she took no distributions. 

Submitted by Kelly Wilt on Wed, 2023-12-20 19:17

The account is an Edward Jones account. Thank you so much. We will be inquiring further as to the odd registration title and the taxes the rep mentioned.

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