best would be to contact the 401k trustee/administrator to find out your options.
here is a summary but an immediate 100% cash out should not be required.
The rules governing how non-spouses inherit 401(k) changed when the Secure Act came into effect. The new law mandated that beginning in 2020, non-spouse beneficiaries of 401(k)s, IRAs and other defined contribution plans had to take full payouts within 10 years after the death of the initial account owner, sometimes referred to as the 10-year rule. That means some non-spouse beneficiaries would miss out on tax-deferred growth that could have stretched decades.
Here are the three main considerations of inheriting a 401(k) as a non-spouse:
1) Mandatory Payout Rule Exceptions: The mandatory payout rule doesn’t apply to minors until they’ve reached the age of majority, at which point, they have 10 years to empty the account they inherited. Additionally, people who meet the government definition of disabled or chronically ill can stretch out withdrawals for their lifetime. Beneficiaries who are not more than 10 years younger than the original account holder at the time of death are also allowed to take distributions under the old rules.
2) Age of Account Owner: What you do with an inherited 401(k) as a non-spouse is tied to how old the account owner was when you inherited the plan and the plan’s distribution rules. If the account owner hadn’t yet turned 70 1/2, it’s possible that the plan may allow you to spread distributions out over your lifetime or spread them out over a five-year period. If you take the five-year option, you may have to fully withdraw all of the account assets by the end of the fifth year following the account owner’s passing. In either case, you’d owe income tax on the withdrawals.
3) Account Rollover: You could also roll the account over to an inherited IRA if the plan allows it. In that scenario, the required minimum distributions would be based on your life expectancy, assuming the account owner hadn’t begun taking them yet. If they had already started taking minimum distributions, you’re required to continue taking those distributions. You could, however, base the distribution amount on your life expectancy instead of the account owners.
