Inherited 401(K)

[Guest KevSId]

I inherited my mother's 401(K). She died in 2004, but I have not recieved the proceeds yet. I will receive them sometime in 2005. For which year will I receive a 1099R and have to pay income tax on the amount? 2004 when I inherited it, or 2005 when the funds are actually disbursed to me.

Also, is there any way to defer or avoid paying income tax on the distribution? It seems that had it been an IRA, I could recieve distributions over a period of years, however, I don't see anything to indicate I can do this for a 401(k) distribution.

[wmyer]

If you take a lump sum payment in 2005, the amount would be taxable to you in 2005, regardless of when the amount was put into your name.

Generally, as the beneficiary, you should be able to take 401(k) distributions in a systematic manner or partial withdrawals, rather than a lump sum. You would just have to make sure you take the minimum required distribution each year.

[QDROphile]

Payment options, if any, for beneficiaries are governed by plan terms.