I know I have to withdrawal the balance of my dads 401k within 10 years of his death but does that apply to my son? I’ve heard both yes and no from people at fidelity. Seems weird if it does apply to him. I would have to file an income tax return for him?? Thanks for any help.
My 6 year old son inherited part of my dads 401k balance. Does the 10 year rule apply to him?
byu/Kaizen_787723 inpersonalfinance
Posted by Kaizen_787723
6 Comments
https://smartasset.com/estate-planning/minor-child-as-ira-beneficiary-requirements
~~For a minor inheriting they can wait until age 21 to withdraw. They will have to transfer that portion to an inherited IRA. Assuming this was done as a beneficiary on the IRA, the institution that hold it should be able to help you do that if they don’t do it automatically.~~
I am wrong, see u/6gunsammy reply below.
Quick Google seems to indicate RMDs until 21st birthday then the 10 year rule kicks in. Maybe reach out to fidelity again and ask more specifically about this.
They absolutely know this answer, and likely have it in writing somewhere. Ask again
Good comments. But we’re yall named as beneficiary ‘s. Why isnt it just a check? Disbursement POD
It sounds like people are getting tripped up over the difference between a child and a grandchild. I will also assume that your Dad died in 2020 or later.
A minor child can be an eligible designated beneficiary, but a minor grandchild cannot.
A grandchild is required to fully distribute the account by Dec 31, of the 10th year following the death of a grandparent.
Whether he must take RMDs in years 1-9 depends on if your Dad had reached his Required Beginning Date or not. If not, no RMD is required in years 1-9, if he had then RMDs are required.
Since your son is not the decedent’s minor child, it should be same rules as any non-spouse inherited IRA (so same rules as you). (Minor children of a decedent have special rules like withdrawals to 21yo, but they don’t apply to 401k inherited from anyone but their parent.)
You may need a court-appointed custodian to manage the funds until your child reaches majority because a minor cannot own or use those funds. Unlike most things, being the parent of the minor child doesn’t give you automatic control. If the decedents was already taking RMDs, the inheritors will have to as well, and yes pay tax. It’s a bit of a mess to leave a retirement account to a minor.