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If someone inherits your 401k, the taxes they owe will depend on their relationship to you and the distribution options they choose. Here are the general rules: 1. Spouse beneficiary: If your spouse inherits your 401k, they can either roll the inherited 401k into their own retirement account (like an IRA or another 401k) or choose to keep it in an inherited IRA. By rolling it over, they can maximize tax deferral since required minimum distributions (RMDs) won't begin until they reach age 72, and they'll be taxed only when they take distributions. 2. Non-spouse beneficiary: If a non-spouse (e.g., a child or friend) inherits your 401k, they typically have to create an inherited IRA. There are two primary distribution options: a. 10-year rule: They must withdraw all the assets from the inherited IRA within ten years of your death. There are no specific RMDs during this period, so they have flexibility on when to take distributions. The withdrawals will be taxed as ordinary income. Proper timing of distributions can help minimize the tax impact. b. Life expectancy method: If the account owner died before 2020, the beneficiary may be able to use the life expectancy method (also known as the "stretch IRA" concept). With this approach, they'll take yearly RMDs based on their life expectancy, spreading the tax burden over a longer period. Note that these rules are for traditional 401k plans, where contributions were tax-deferred. If the inherited account is a Roth 401k, qualified withdrawals are generally tax-free. It's essential for the beneficiary to understand their options and choose the one that best aligns with their financial situation and tax strategy. Tax laws can change, so it's a good idea to consult with a tax professional to help navigate the specific situation.