Inherited 401K from sibling
August 29, 2013 10:36 AM Subscribe
One of my siblings passed away unexpectedly a few weeks ago and I am one of the beneficiaries for her 401K. I would like some basic information on my options for handling the money. My share is not quite enough for me to pay a CFP (low $40K range) and I'd like to have some idea of where I stand before getting all the paperwork.
posted by anonymonkey to work & money (11 answers total) 2 users marked this as a favorite
My understanding so far is as follows, and please correct me if you know otherwise:
1) I can let it sit, and there is a time limited period for how long I can do this.
2) I can roll it over to a new IRA of my own (but cannot combine it with my existing retirement funds).
3) If I withdraw the money, I owe income tax, but I do not owe a penalty.
What I am confused about:
How a rollover IRA works, when I could be required to take distributions, and whether I can still withdraw without a penalty from a rollover. I am in my mid-30s, so nowhere near the normal age to withdraw, and many of the scenarios online outlining required minimums are using examples much older. I do not have any immediate need for the money and do not want to take a large tax hit on it, but my sister would have wanted this to be used for the benefit of my kids, so it will likely be withdrawn before I retire. (I know that many financial professionals would likely argue against this.)