How to do it?
Call the 401 company and ask them what they need. Usually they just need the death certificate, but they may also need to verify your identity as the beneficiary. Follow their rules whatever they are.
What to do with the money?
Here are the key concepts you need to know.
1. You can withdraw the money (cash out) or you keep the money as an "inherited 401k", or you can rollover the money into an "inherited IRA". Any money you withdraw will be taxable (unless it is a Roth 401k) but there is no 1-0% penalty if you are under age 59-1/2. You can't rollover an inherited account into your own IRA or 401k, it must be kept separate as an inherited account (it may be titled something like "John Smith as beneficiary of Mary Smith").
2. If your mother was past her RMD beginning date (generally age 73 or older), and she did not withdraw her RMD for 2025 before she died, you must withdraw her RMD and pay tax on your tax return. If she did withdraw her RMD, you do not have to take a withdrawal in 2025 if you don't want to.
Remember that an RMD is not a special withdrawal or special procedure. It is simply the minimum amount you must withdraw under the regulations. You can always withdraw more. Suppose your mother had an RMD of $5000. That would be satisfied if she made a withdrawal of $5000 any time during the year. But it would also be satisfied if she withdrew $30,000 in March to buy a car. Suppose she was withdrawing $500/month over the year for regular living expenses. She withdrew $3,000 before she died so you need to withdraw another $2,000. (You can always withdraw more, and RMD is the minimum amount.)
3. You must withdraw all funds and close the account by 10 years after the year she died, so in this case, December 31, 2035.
4. If she was past her RMD beginning date when she died, you must also withdraw RMDs over those 10 years as long as the account is active. These RMDs are calculated based on your age, not hers. If she was younger than her RMD beginning age, then you don't have any special withdrawal requirement other than the account must be withdrawn and closed in 10 years.
Unless you need the money right away, it will usually help keep your taxes low by spreading the withdrawals out over those 10 years. However, there are many variables and you might want to talk to a financial advisor.
