Question : Hi! I am trying to get the best information on how to handle an inherited 401K? Is it best to roll over the funds to another 401K or IRA? Do taxes have to be taken out right away or only when the funds actually are distributed? Thank you!<br/>JA: Have you talked to a tax professional about this?<br/>Customer: No not yet…question just came up this morning.<br/>JA: Anything else you want the Accountant to know before I connect you?<br/>Customer: No
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Answer : Since you are dealing with an inherited 401(k) as a non-spouse beneficiary, your options are a bit limited. One option is to leave the funds in the existing 401(k) account and distribute them in future tax years (there are no current tax implications in doing so). Alternatively, you can roll over the inherited 401(k) funds into a new inherited IRA account (not an existing IRA account since it is an inherited account). While I am not an attorney and cannot provide legal advice, a 401(k) account may provide certain bankruptcy protections which may not be applicable to IRA accounts. Accordingly, you may want to consult with an attorney if this consideration is important for you. Does that help?
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