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Parent died and we are beneficiary on retirement plan. If we

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take the money in a...
Parent died and we are beneficiary on retirement plan. If we take the money in a lump sum distribution will we have to pay taxes?
Submitted: 1 year ago.Category: Tax
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1/12/2016
Tax Professional: emc011075, Tax adviser replied 1 year ago
emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,237
Experience: IRS licensed Enrolled Agent and tax instructor
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Hi. My name is ***** ***** I will be happy to help you.

It depends on what type of retirement plant it is. If the contributions were made pretax like 401K or IRA than the distribution will be taxable, regardless how it is distributed, lump sum or periodic payments.

If the contributions were made after tax like Roth IRA, than the distribution will be tax free.

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Tax Professional: emc011075, Tax adviser replied 1 year ago

Most employer sponsored retirement plans are pretax. Very few employees pick up aftertax contribution like Roth 401K. If it is an IRA, the administrator of the plan should be able to tell you how much of the money are pretax and how much after tax. If it is IRA, I would also check with your parent tax adviser. Some of the IRA contribution could be nondeductible, which makes it after tax.

I see you offline now. So if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.

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