Lynn Brenner Lynn Brenner

Brenner answers questions about all aspects of family finance.

I understand that after age 70, my husband and I will have to start taking required minimum distributions (RMDs) from our 401(k) plans. Our son is our sole beneficiary. Upon our deaths, does this money become taxable for him, or can he roll it over into his own 401(k) plan or into another nontaxable vehicle?

Your son can't move the retirement accounts he inherits from you into his 401(k) plan. But he can transfer them into inherited IRAs. He can then empty those IRAs over his life expectancy, paying taxes only on required minimum distributions every year. The account balances will continue to grow on a tax-deferred basis.

advertisement | advertise on newsday

But he must transfer the money correctly to preserve its tax-deferred status. If he accepts a check that your 401(k) plan issues in his name, the entire amount will be taxable, even if he deposits it in an inherited IRA the next day, says Barry C. Picker, a Brooklyn tax accountant. Instead, he should ask the 401(k) plans to move the money directly to the inherited IRAs in a tax-free "trustee-to-trustee" transfer.

And he should be listed on the inherited IRA as its beneficiary, not its owner. An inherited IRA must always be titled in its original owner's name: for example, Mary Rogers IRA (deceased Jan. 24, 2012) for the benefit of John Smith. Finally, your son must begin taking taxable annual RMDs based on his own life expectancy from the inherited IRAs no later than Dec. 31 of the year after the original owner's death. He can always withdraw more if he wishes. But if he withdraws less than the RMD, he'll incur a penalty equal to 50 percent of the amount he should have taken but didn't.

The bottom line Your 401(k) beneficiary can move the account into an inherited IRA after your death. Websites with more information and