Can an inherited non-spouse 401k be rolled over into an IRA or ROTH IRA?
My wife?s father passed away in April, 2005 and she inherited a portion of his 401(k) plan. She has not paid any taxes on the funds and has not received any distributions.
I?ve been reading on the internet to try to figure this out. My understanding is that the Pension Protection Act of 2006 allows a person inheriting 401(k) funds to roll those over into an IRA for distributions that occur after Jan. 1, 2007. I also believe that the trigger date (for the Jan. 1, 2007 cutoff) is the date of the distribution, not the date of the participant?s death. Is all of this correct?
If that?s correct and she is able to roll the money into an IRA, are there important things to remember when setting up the IRA? I read that the money needed to be rolled over directly to an IRA and that if Vanguard sent a check to my wife that it would become taxable even if the check was deposited directly into an IRA. This same article mentioned that the IRA needed to be specially set up and couldn?t be combined with an existing IRA. Are these accurate?
Is there a maximum income level for rolling this money over into a ROTH? If we exceed the ROTH income level this year, can my wife roll this over the amount into a ROTH IRA if we meet the ROTH criteria in some future year?
Thanks for your help.
(Asked 12/07/08, Views 53)