How to guide
Why this matters
Retirement accounts pass to the named beneficiary outside probate, often within 60 days. The wrong handling can trigger immediate taxation of the entire balance, so understanding the options matters.
Step by step
- Locate the account custodian. The deceased's last statement, employer (for 401k), or tax returns reveal where accounts are held.
- Call the custodian and identify yourself as the named beneficiary. They will send beneficiary claim forms.
- Provide: claim form, certified death certificate, your government ID, and account number.
- Choose your option. Spouses have the most flexibility: roll into your own IRA, treat as inherited IRA, or take a lump sum. Non spouse beneficiaries generally must take distributions within 10 years under the SECURE Act.
- For a spousal rollover: the funds move into your own IRA and continue tax deferred until you take distributions in retirement.
- For an inherited IRA: take required minimum distributions over 10 years (most non spouses) or stretch over your lifetime if you qualify (minor children, disabled, chronically ill, less than 10 years younger than deceased).
- Most claims are processed in 30 to 60 days. Funds are deposited or transferred to a new account as you direct.
Forms you will need
- Custodian beneficiary claim form
- Certified death certificate
- Form W-9 if non spouse
State by state notes
Retirement account beneficiary rules are federal under ERISA (for 401k) and IRS rules (for IRA). State rules do not affect the basic process.
Common mistakes to avoid
- Taking a lump sum without understanding the tax cost. A large lump sum can push you into the highest tax bracket.
- Missing the 10 year deadline (non spouses) under the SECURE Act, which results in IRS penalties.
- Cashing out a 401k before consulting a financial advisor.
- Letting an inherited IRA sit without action. Required minimum distributions begin in specific years.
What to do if you get stuck
A fee only financial advisor or CPA can model the tax consequences before you choose your option. The decision often saves or costs tens of thousands of dollars.
Frequently asked questions
Do I have to pay taxes on an inherited IRA?
Yes, distributions are taxable as ordinary income. Spousal rollovers defer tax until your own retirement. Non spouse beneficiaries pay tax as they take distributions over 10 years.
What is the SECURE Act 10 year rule?
Most non spouse beneficiaries must empty inherited retirement accounts within 10 years of the original owner's death. There are exceptions for spouses, minor children, disabled, chronically ill, and beneficiaries less than 10 years younger.
Should I roll my deceased spouse's IRA into my own?
In most cases yes. It keeps the maximum tax deferral and gives you flexibility over distributions. The decision is harder for very large IRAs or specific tax planning situations.
How long does it take?
Typically 30 to 60 days from filing the complete claim. Some custodians are faster.
What if there is no named beneficiary?
The account passes to the estate and goes through probate. This often forces faster distribution and higher taxes.