[suze122]

My sister has been named beneficiary Mom's 401K. Mom passed away last week and my sister said her accountant stated she needs to pay Mom credit cards and pay taxes before she can inherit any of the money. Is the accountat correct that my sister must use the inheritance to pay credit card debt left at time of my Mom's death?

[ScottGem]

First its not a good idea to piggyback your question on someone else's. This can lead to confusion. Especially when your question has nothing to do with the thread as in this case. You should start a new thread. So I've moved your question to its own thread.

The accountant is correct that any debts owed by your mother need to be paid off from the proceeds of the estate. This has to be done before any monies are distributed to the beneficiaries of the estate. So your sister, assuming she is executor of the estate, needs to set up an estate checking account that she can use to pay the debts from.

However, I believe that since she is a named beneficiary for the 401K plan that it passes directly to her outside the estate, so it wouldn't have to be used for debt payment. But I would double check that with a probate atty.

Any debts that you mom owed are terminated with her death so you or your sister are not responsible for those debts, only her estate is responsible. So, like I said, the debts get paid first before the estate can be distributed. So the real question is whether the 401K becomes part of the estate or not.

Your sister can rollover the proceeds of the 401K into an IRA to avoid paying taxes on it.