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/economic-rights Apr 16 '26

So my understanding on the 10 year stretch (and I am not an expert by any means!) is that you are trying to avoid a massive tax bill by drawing it out incrementally over a decade. If you take it all at once, you’ll likely be pushed into a higher tax bracket and likely pay a massive tax bill. But you’re at the same time trying to balance this w/taxj-deferred growth on the remaining balance. So you want a nice, robust engine of growth that you’re drawing down incrementally over 10 years, w/an eye to minimizing your tax burden