How you can avoid taxes on a 401K inheritance
Understanding your options is the key.
There is another option that will allow you to completely avoid paying taxes on a 401k inheritance: disclaim it. If you disclaim a 401k inheritance, it will go to the contingent beneficiary, and you will have no tax issues to deal with. You could consider this option if you don’t need the money or would rather it go to someone else.
It’s always hard to lose a loved one, and making financial decisions during those times can be difficult. Deciding what to do with an inherited 401k can be a complex process that depends on many other factors, far beyond what can be covered here. That’s why it is important that you talk to your financial planner and tax specialist before you make any decisions.
This is a hypothetical illustration meant to demonstrate the principle of compound interest and is not representative of past or future returns of any specific investment vehicle. They do not include consideration of the investment fees or expenses, time value of money, inflation, fluctuations in principal or taxes.
Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from your qualified tax and/or legal professionals to help determine the best options for your particular circumstances.