Inheritance tax in PA

[Joe B.]

What is the name of your state?What is the name of your state? PA

Is an inherited 401K from an ex-spouse subject to inheritance tax in PA if the decedent was 50 years old and there was a 10% penalty for withdrawals from the plan? (Less than $50,000.)

[LdiJ]

Originally Posted by Joe B.

What is the name of your state?What is the name of your state? PA

Is an inherited 401K from an ex-spouse subject to inheritance tax in PA if the decedent was 50 years old and there was a 10% penalty for withdrawals from the plan? (Less than $50,000.)

I had to read that a couple of times to make sure I understood you, so I want to clarify....Your ex spouse died and you inherited from him a 401k account with less than 50,000 in it.

It would not be taxable unless you withdraw from the account. If you are not 59 1/2 you will be stuck with the penalty.

[Snipes5]

There is no penalty for "early withdrawal" from an inherited 401k unless the spouse has rolled the 401k into one of his or her own.

There is a reason code 4 used on such withdrawals, eliminating the penalty, though they are still taxed at a taxpayer's marginal rate.

Snipes

[LdiJ]

Originally Posted by Snipes5

There is no penalty for "early withdrawal" from an inherited 401k unless the spouse has rolled the 401k into one of his or her own.

There is a reason code 4 used on such withdrawals, eliminating the penalty, though they are still taxed at a taxpayer's marginal rate.

Snipes

oops....I concur...

[anteater]

To quote the PA Dept. of Revenue:

"IRAs are not subject to Inheritance Tax when the decedent is under the age of 59 1/2 at the time of death. For 401K’ s, the same provision applies unless the owner of the plan could have closed out the plan during their lifetime. In most plans, that right does not accrue until the "normal retirement age" is reached, which is usually 62 or 65 years of age."

[LdiJ]

Originally Posted by anteater

To quote the PA Dept. of Revenue:

"IRAs are not subject to Inheritance Tax when the decedent is under the age of 59 1/2 at the time of death. For 401K’ s, the same provision applies unless the owner of the plan could have closed out the plan during their lifetime. In most plans, that right does not accrue until the "normal retirement age" is reached, which is usually 62 or 65 years of age."

He didn't ask about inheritance tax. He asked about the 10% penalty for early withdrawal.

[anteater]

Originally Posted by Joe B.

Is an inherited 401K from an ex-spouse subject to inheritance tax in PA if the decedent was 50 years old and there was a 10% penalty for withdrawals from the plan? (Less than $50,000.)

Uh, I thnk that is what Joe was asking.