Hello, My parents passed away this year and I am only child and executor. My Dad has a 401k that is transferred to the estate. Can I cash it out without being taxed?

Forum|Forum|3 years ago
September 9, 2022
2 replies
17 views

I understand that inheritance is not taxed but I am unsure how to handle this asset.

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Bsch4477

Level 15

You will have to pay tax at your marginal tax rate on withdrawals. You have to have all of the amount in the account distributed within 10 years.

dfwsharp1967Author

Level 2

Can the money be moved into another tax deferred investment?

Critter-3

Level 15

@dfwsharp1967

No it cannot if the estate is the beneficiary.

Mike9241

Level 15

a 401k is regarded as income in respect of a decedent. as such it gets no step-up at date of death.

Mike9241

Critter-3

Level 15

If there was no beneficiary listed and the estate got the distribution then either it can pay taxes at a very high estate rate or pass it thru to the beneficiaries to be taxed at their lower tax rate. If the issuer withheld taxes then they are put on the estate return to be used or refunded ... this cannot be passed thru. Seek local professional assistance if you are unsure how to properly file a form 1041.