Contact UsMy children received an inheritance from a relative. They received a 1041 form stating they need to pay income taxes on the distribution.
The distribution came from the deceased IRA and 401k accounts. We deposited these funds directly into 529 Education Accounts for the children (all minors). I thought that my children would not have to pay income taxes since the money was deposited directly into the 529 account. I have three children and they each received $35,000.
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Tax Professional Answers
John Stancil
Unfortunately, they will have to pay taxes on the inheritance. Inherited IRA's and 401(k) accounts are subject to tax, as they are tax-deferred retirement accounts. The 529 plan does not give rise to a tax deduction when deposited, so tax is due on the inheritances.
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487 weeks ago