My mother got into a car accident and can not make decisions on her on. i am currently her power of attoney. how can i cash out her 401K to pay for her expenses?Financial Planning
she has been out for over a week and doctors expect her to be disabled for quite some time. i need help to pay for everything so how can i get her 401k?
I am very sorry to hear about your Mother's car accident and the possibility of her long-term disability. Call the plan administrator to determine what they need from you as Power of Attorney to initiate a withdrawal. The phone number would be on her most recent 401(k) statement. If your Power of Attorney is not recent you may find it difficult to proceed with your request. Be aware that penalties and tax implications may apply.
Hi Crystal, I'm very sorry to hear about the situation your mother is in. The IRS will allow for hardship withdrawals, so that the 401k participant will not have to pay the early withdrawal 10% penalty. The amount you can withdraw may vary from plan to plan, as employers usually figure this out when designing the initial 401k plan. The best people to contact are the plan administrators, who take care of issues such as this. They will take care of the "admin" of making this withdrawal happen. Please be sure to contact a CPA so you are very clear on the tax implications of doing this withdrawal. Best Wishes, Joe
Sorry to hear about your mother. FYI the IRS does allow for "hardship" withdrawals, of which unreimbursed healthcare expense likely qualifies. However, you need to make sure your Mom's individual plan allows for such a withdrawal. Your first course of action is to call the HR Department at your mother's workplace and tell them what's going on. They should be able to counsel you. This is their job...so don't worry about asking the department for help.
If the hardship withdrawal to benefit your mother is approved by the company, you need to contact your Mom's accountant or tax attorney to ask how this withdrawal will be treated from an income tax perspective. I expect he/she will tell you that your mother must first exhaust all other means to pay her medical bills, then after that, her 401k may be tapped without a 10% penalty for withdrawal before age 59 1/2. I expect you will be advised that the withdrawal will be added to her gross income for the year and subject to regular taxation, however.
Best of luck.
Hi Crystal. I am sorry to hear of your mother’s condition. First, you need to find out if your mother’s 401(k) allows hardship distributions. Though common, not all 401(k) plans do. You need to contact HR at your mother’s employer to get the phone number of the Plan Administrator. The Plan Administrator will advise you of whether you have the option for a hardship distribution, and what the requirements and procedures are. By design, they are not easy to get. Unfortunately, you may meet all the requirements. Here is a link to the IRS ‘Frequently Asked Questions’ for hardship withdrawals.