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Choosing a Beneficiary for Your 401(k) Plan

Choosing a Beneficiary for Your 401(k) Plan

When you sign up for your 401(k) plan, you will typically be asked to fill out a beneficiary designation form listing who should receive your 401(k) plan assets when you die.  Make these selections carefully, since they typically override any provisions in your will.

If you are married, federal law dictates that your spouse is automatically your 401(k) plan’s beneficiary.  Even if you list another person as the primary beneficiary, your spouse will receive the proceeds unless he/she signs a written waiver.  Thus, even if you are separated but not divorced from your spouse, he/she will be entitled to your 401(k) proceeds after your death.

Similarly, if you remarry and want to keep your children from a previous marriage as the beneficiaries, you must have your current spouse sign a waiver.  You should not rely on a prenuptial agreement or other document.

When you beneficiaries are minor children, keep in mind that most 401(k) plans will not transfer money directly to minors.  Thus, you may want to set up a trust so the trustee can take immediate control of the funds.  Otherwise, a court-appointed trustee or guardian may need to be named before your children will have access to the funds.

If you are single and don’t name a beneficiary, the proceeds will go to your estate and be distributed with the rest of your assets.

Periodically review your beneficiaries to determine if changes are needed.  A divorce, remarriage, spouse’s death, or child’ birth are all events that may require changes to beneficiaries.

Please call if you’d like to discuss this topic in more detail.

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