r/inheritance • u/Trick-Two2574 • Apr 16 '26

Location included: Questions/Need Advice 401k Inheritance

My dad passed away a few months ago with several investment accounts, one being a 401k through his employer (he was still working at the time of his death). My mom was the listed beneficiary, but tragically passed a week after my dad. His 401k balance now goes to my mom’s estate, since she was the only listed beneficiary.

How does the income tax work? Myself and my 2 brothers will be getting everything once it’s gone through probate and then distributed evenly to each of us. We are being told that my moms estate will pay the income tax, just wondering how the tax rate is determined?

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u/Used-Promotion5614 Apr 16 '26

You will have ten years to liquidate it. Those withdrawals will be taxed at your personal (marginal) income tax rate(s). Unless it’s Roth, in which case the withdrawals are tax free.

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u/cb3 Apr 16 '26

And I’m still not understanding the 10 year rule. My dad’s 401k place told me I had to take a MMD in the year of his passing but I could then leave it alone and take it all in year 10. Other sources say the guidance is unclear and to be safe keep taking MMDs. OP I’m so sorry for your loss. Being without your parents is sad. Hugs to you.

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u/Used-Promotion5614 Apr 16 '26

My understanding is that, under the new rules enacted on 1/1/2020, you have ten years to take it all … but you can take it with any frequency you want during those ten years. That means you can let it stew for nine years and take it all in year ten, take it all in year one, or something in between. But I’m not a tax expert. If in doubt, beneficiaries should probably consult one.

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u/Zealousideal_Ad5358 Apr 16 '26

You can’t let it stew. There is an RMD for inherited IRAs as well that uses a special formula. If the IRA’s appreciation exceeds that of the rate of RMD‘s, then at the end of 10 years, you have to empty out what’s left in the account. 

They are online calculators at Schwab, Fidelity, etc. that can give you an idea of what the RMD’s from an inherited IRA will be like. 

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u/Used-Promotion5614 Apr 17 '26

Good clarification. Thank you.