401K non-spouse beneficiary

[dnulnoj]

What is the name of your state? DE

Not sure if this is proper place to post but I'll put it here anyway

Mom lived in PA, deceased now *bless her soul*

I am the administrator of her estate, and I was a benficiary of her 401k.

They tell me because I am not a spouse I must take lump sum payment.

How does this affect my income/taxes or is it under the inheritance tax umbrella.

Also I would rather put the money into the estate to divide between my 2sisters and I..but I am not sure if there is any tax penalty with lump sum distribution.

My lawyer told me to roll it over and keep it taxed deferred, but they are not allowing me to do that.

ANy assistance in this matter would be greatly appreciated

 

[Dandy Don]

The company holding the money can sometimes answer your question about the tax consequences, but if they can't or won't do it, then you need to be talking to a local CPA or tax accountant about this.

Since you were named as beneficiary, the money goes directly to you and passes outside of probate. After you get the check, you can distribute it any way you want to the others, but there is no obligation for you to do that, since the money is yours.

 

[dnulnoj]

Thank you much for the reply..I am currently pursuing the CPA avenue, and having my lawyer check also, but what you said makes sense and just glad I am heading in the right direction

 

[wanabath]

My lawyer told me to roll it over and keep it taxed deferred, but they are not allowing me to do that.

And is your lawyer a financial planner also?? OK advice but speak with a financial planner, aside with your lawyer and cpa.

 

[taxlady@pacbell]

401K inheritance

Unfortunately, as a non-spouse you are not allowed to roll over the 401K proceeds from the inheritance. You will receive a 1099R from the issuing Administrator, and that will have to be added to your other income for the tax year, and taxes paid. For more information please go to www.irahelp.com and see 401K information inheritance.
As far as the proceeds go, you can split any way that you want, but keep in mind, you will receive the IRS 1099 form and be responsible for paying the taxes.
ST