Hello all.
This is a first one for me.
I have a client who's 12 year old son inherited his uncle's 401k. No trust involved as Uncle just named his nephew the 100% beneficiary. I know that the first step would be to go over the plan document to make sure it's not too restrictive. But assuming it allows "basic" inheritance options, my concern is how state law (CA) governs 401k inheritances for minors.
My initial assumption is that the parent can establish an UTMA for the minor and have the RMDs (or entire amount?) deposited into it. Or (if the plan allows) should the money be rolled into an Inherited IRA? Either way, will the minor's income be subject to Kiddie Tax??
Thank you in advance for any wisdom!