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dfwsharp1967
New Member

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?

I understand that inheritance is not taxed but I am unsure how to handle this asset.
8 Replies
Bsch4477
Level 15

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?

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.  

Mike9241
Level 15

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?

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

Critter-3
Level 15

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?

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.

dfwsharp1967
New Member

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?

Can the money be moved into another tax deferred investment?

Critter-3
Level 15

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?

@dfwsharp1967 

 

No it cannot if the estate is the beneficiary.

dfwsharp1967
New Member

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?

Thanks so much!  Will I have to file tax returns for them or the estate for this year?

Critter-3
Level 15

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?

YES ... if the estate recieved $600 or more of income then it must file a return ... please seek local professional assistance if needed. 

Critter-3
Level 15

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?

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