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Access Late Husband's 401(k) Balance

Wednesday, Jul 22, 2009

Question: My husband passed away 7 months ago and I was wondering if I pulled out his 401(k) how much would I be taxed? He was only 30 so there is only a small amount but I could really use the cash. Thanks

Answer: First, please let me offer my condolences on the untimely loss of your husband. Generally speaking, when a 401(k) account holder passes away, the plan will pay out the balance of the account in a lump sum to the decedent’s beneficiary (you, in this case). The distributed funds would be taxable, but you would not be required to pay the 10% early withdrawal penalty. Usually, the plan administrator will withhold part of the 401(k) balance to pay taxes, so while the amount of the distribution will be less than the full balance of the 401(k), you should not be required to pay any additional taxes out-of-pocket.

As
the surviving spouse of a deceased 401(k) plan member, you also have the option to roll over the balance of your husband’s 401(k) into an Individual Retirement Account (IRA), which would allow you to defer the payment of taxes on the funds, though it would also greatly limit your access to the money. Your husband’s plan may also allow you to elect to have the funds paid out over a set period of time, in some cases up to your projected life expectancy,
allowing you to stretch out the payment of your tax obligations. However, if you need the funds to pay for your current day-to-day living expenses, these two options may not be the most practical choices. To read more about the inheritance of 401(k) accounts, you can visit Research 401(k).

I wish you the best of luck for the future, and hope that the information I have provided helps you Find. Learn. Save.

Best,
Bill
www.bills.com

Also, make sure to get a free financial health check-up with Bills IQ!

User Comments

1. Posted by bobbie on Thursday 12th November 2009 10:24

hi there my husband died jan 31 of 2008 he always told me he had an IRA set aside but i never paid attention to it he died suddenly in an accident and i just was wondering if theres a way to see if he really did have one i have since lost our house in forclosure and would not know where to start please if you have any advice it would be appriciated.

2. Posted by Bill on Friday 13th November 2009 11:29

Some state governments keep a list of abandoned bank accounts. Check with your state to see if it does so. Otherwise, all I can suggest is to find whatever financial documents you may have and see if you can learn which banks or other financial institutions he transacted business with.

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