My Brother Died, My Mother Died, Can I convert my dead Brothers 401K into an Inherited IRA, How do the taxes get paid?
My 54 year old brother passed away in 2024. In February 2025, my 88 year old mother passed away.
My brother did not have any family members, and our mother was the named beneficiary of my brother’s traditional 401K. Before my mother was able to roll over the 401K to an Inherited IRA, she passed away.
I have heard that you can do a one time inflight conversion from the 401K to an inherited Roth IRA. Is this still a possibility now that the plan participant has passed away and the beneficiary has passed away? If it is possible whose tax return is responsible for paying the taxes?
Thank you
C
Permalink Submitted by Alan - IRA critic on Fri, 2025-05-09 18:34
Unfortunately, only a designated beneficiary can do a direct rollover to an inherited IRA or inherited Roth IRA. Your mother was the designated beneficiary, but apparently did not name her own beneficiary. That resulted in her estate becoming the successor beneficiary, and you inherited as a beneficiary of the estate.
IRS rules do allow the plan to treat the estate (or you as the estate beneficiary) with the same RMD rules as mother would have had, but almost all plans will require a total distribution to the estate. They will not be willing to keep the account open for that period of time that would have been allowed for mother, and you could expect them to be asking you for the estate EIN so they can make a total distribution.
Note that even if mother had named you as her successor beneficiary on the plan, you would still have been a successor beneficiary, not a designated beneficiary, so there would have been no way to move the funds into an inherited IRA. But the plan would probably have allowed you to take distributions over mother’s remaining LE (only 6.6 years), and the taxes would have been spread over that period. But not naming her own beneficiary will almost always result in the plan making a total distribution.