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How long it takes to get the 401K inheritance depends on whether you are the beneficiary or not. If you are the beneficiary, you can get it immediately depending on whether you are a spouse or not and the the 401K rules. If there is no beneficiary in the 401K account or the designated beneficiary has predeceased, then the estate will receive the 401K funds. A petition for probate or administration needs to be filed in order for an administrator or executor to be appointed. The adminitrator or executor is the only person authorized to receive the 401k proceeds on behalf of the estate.
Spouse vs. Non-Spouse Beneficiary
The timeline for receiving a 401(k) inheritance after the account owner's passing varies depending on the beneficiary's relationship to the deceased.
For spousal beneficiaries, they have the flexibility to begin receiving payments by the end of the year following the account owner's death or by the end of the year when the spouse would have turned 70 ½. Additionally, spouses can postpone distributions until the account holder would have reached 73 if the death occurred before the required beginning date. Spousal beneficiaries also have multiple distribution options, such as rolling over the funds into an IRA, opting for a lump-sum distribution, or spreading out the distributions over their lifetime.
In contrast, non-spouse beneficiaries are required to withdraw the entire balance within a 10-year period following the account holder's death, as stipulated by the SECURE Act. Unlike spousal beneficiaries, non-spousal beneficiaries do not have the option to stretch payments over their lifetime or delay distributions.
If the estate is designated to receive the 401(k) proceeds, it will receive the funds in a lump sum once the estate is established and an administrator or executor is appointed.
While the IRS provides general guidelines for 401(k) plans, it's crucial to recognize that individual plans may have their own specific rules within this framework. Beneficiaries are advised to review the summary plan description to understand the details of how distributions are managed for their particular plan.
What Happens When You Inherit a 401(k)
There are tax consequences when inheriting a 401(k). The tax consequences would depend on several factors, including the type of 401(k) (traditional or Roth), the relationship between the beneficiary and the account holder, and the age of the beneficiary. The tax consequences are influenced by how the beneficiary chooses to receive the inherited 401(k). A lump-sum distribution can increase the beneficiary's taxable income for the year, potentially pushing them into a higher tax bracket. Consulting with a lawyer or tax professional is important when inheriting a 401K.
If you require assistance in your 401K inheritance, the Law Offices of Albert Goodwin is here for you. You can call us at 212-233-1233 or send us an email at [email protected]. We are located in Midtown Manhattan in New York, NY.
About the Author
Albert Goodwin Esq. is a licenced New York attorney with over 17 years of courtroom experience. His extensive knowledge and expertise make him well-qualified to write authoritative articles on a wide range of legal topics. He can be reached at 212-233-1233 or [email protected].
