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    Fuldun302's Avatar
    Fuldun302 Posts: 1, Reputation: 1
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    #1

    Feb 18, 2010, 03:59 PM
    401k bereavement dispursement
    My wife passed away and left me her 401k. The total estate value is below the taxable threshold. Can I take the dispursement without penalty, how long do have to act on this? It has not been moved from her employers 401k program.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Apr 21, 2010, 02:51 PM
    The 401K can be disbursed to the beneficiary without paying the 10% Early Withdrawal Penalty.

    However, the disbursement WILL be taxed as ordinary income by both the federal and state (if the state has a state income tax).
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #3

    Apr 22, 2010, 07:06 AM

    You also have the option of rolling all or a portion of her 401(k) into your own IRA, thereby continuing tax-deferral until you start taking distributions.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #4

    Apr 22, 2010, 09:07 AM
    Excellent point, ebaines; something I should have pointed out.
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