401(k) Beneficiary Rules: What Happens When You Inherit

A surviving spouse can roll the inherited 401(k) into their own IRA, treat it as their own, or take it as an inherited account. Rolling it into your own IRA gives you the most flexibility and delays RMDs until your own RMD age.

Under the SECURE Act and SECURE Act 2.0, most non-spouse beneficiaries must empty inherited retirement accounts within 10 years of the original owner's death. "Eligible designated beneficiaries" — including minor children, disabled individuals, and chronically ill individuals — may have different options. Annual RMDs may be required during the 10-year period if the original owner had already started RMDs.

Distributions from inherited pre-tax accounts are generally included in the beneficiary's ordinary income. Inherited Roth accounts can be distributed tax-free if the original 5-year holding period was met. The 10% early withdrawal penalty does not apply to inherited accounts, but income tax does.