What Are 401 K Beneficiaries? How To Designate 401k Beneficiaries?

People who secure their retirement are always thinking about more than themselves. They are thinking about the people around them and those close to them. When you have a 401K retirement plan, you must ready yourself to choose a 401K beneficiary in your will. 

So, when you pass away before you can withdraw your retirement fund, someone close or someone you want to receive that fund receives it. But how do you designate your beneficiary? Also, who do you select as your beneficiary at your will? Most people wonder what is the rule for 401k beneficiaries for surviving spouses or surviving children. Are you also worried about all these questions? 

In that case, I will suggest going through this article. Aside from those questions, you will also find out how to select your beneficiary for 401k investment funds. 

What Is Beneficiary?

When someone sets up a 401 k beneficiary, they are generally asked to designate the name of a person as the primary beneficiary. If the 401k investor passes away, the beneficiary is the second person in line to receive the fund invested and stored in the 401k account.

A good thing about this is that the beneficiary directly receives the fund without having the fund to await profitable court. So, what options do you have when choosing a 401k beneficiary? Here, let’s find out –

Who Are Possible 401k Beneficiaries?

Usually, people choose their spouse or their children as their beneficiaries. Here are some mentions as to who might be your possible beneficiaries. 

Spouse Beneficiary

Under US federal law, the inverter’s spouse is the beneficiary by default if the investor were to pass away. So, by default, you can name your spouse as the primary beneficiary. 

But, if you want someone else to be your primary beneficiary, you must get your spouse’s written consent first. Also, if you married your spouse before or during your death, they can legally claim the 401k fund. This is possible even though you named someone else as your primary beneficiary. 

Non-Spouse Beneficiary

If your 401 K beneficiary is not your spouse, then you can list their name as your 401k beneficiary as well. For example, you can choose your minor child as the beneficiary. But, you still need to get a consent letter from your spouse if you are married. 

Multiple Beneficiaries

Since there is a primary beneficiary, there must also be other beneficiaries, right? Yes, You are correct. You can have multiple beneficiaries for the 401 k investment fund and nominate them to pass on a specific percentage of the fund to them. 

Trust Account As Beneficiary

You can develop a trust account and use it as a beneficiary for the 401k funds you have been investing in throughout your career. You will clearly understand when and how the money you save is distributed. A good decision now would be to get help from the estate planning attorneys. 

Estate As 401k Beneficiary

Suppose you do not have a spouse or do not want to designate a non-spouse beneficiary, then you can choose estate as a 401K beneficiary. What you have to do is to let the money get distributed through the probate court process that is connected to the wills. 

Now, let’s say that you are not married and a working professional with an active 401k account. Then, who is your beneficiary? Well, you might choose a beneficiary. But as soon as you are married, your spouse becomes the beneficiary by default unless they sign any consent form.

But if you have not designated your 401k beneficiary or failed to do so, the money will get distributed through the probate court. 

Is A Secondary 401k Beneficiary Necessary?

Yes, obviously. If you do not name a secondary beneficiary and if the first beneficiary dies before they claim the fund, then it will create complexity. The complexity is that the money funded in your 401k account gets distributed via the probate court if you are not naming a secondary 401k beneficiary. 

It is like having a backup plan for the backup plan. When you choose a beneficiary for your 401k fund you must also ensure that your beneficiaries also have their beneficiaries. In case your beneficiaries also pass away before naming their beneficiaries then also the asset will go through the probate court. 

How To Change 401k Beneficiary?

The person you may have chosen as your 401k beneficiary may not be eligible to benefit from the 401k fund you have been investing. So, changing your beneficiary from time to time might be necessary. In fact, it is a good practice to annually revise your beneficiary and change them according to your current preferences. 

You can change your beneficiaries as frequently or as many times as you want. You can designate a beneficiary by following the steps below –

• First request for a beneficiary form from the beneficiary administrator. 
• Then, fill out the form and submit it to the beneficiary administrator to successfully change the name of the 401 k beneficiary.

Aside from changing preferences, it might also be important and helpful to change the name of your beneficiaries as major life events give your life a turn. Here are some of the common major life events that might compel you to change the name of your beneficiary –

• Marriage
• Death of the spouse 
• Divorce
• Birth of a child/adoption

Also, you must change your beneficiary after your divorce. Because if you pass away, your ex-spouse will legally be able to withdraw your 401k funds by default – only if you do not change the name of the beneficiary after a divorce. It does not matter how long ago the divorce was. 

Bottom Line

Also, once you finalized your beneficiary you must tell them where the fund is located so that they can seek it out after you leave the fund to them. Also if you are inheriting a 401 K fund from your spouse or a spouse beneficiary, you can leave the fund to the existing plan. 401k fund beneficiaries can also leave the fund at the 401k funds. However, in that case, they have to adhere to the rules and regulations of the investment plan. 

So, now that you know what a 401k beneficiary is and how to set it up, will you be able to correctly designate your 401k beneficiary? Are there any queries you have related to 401k beneficiaries? Please let us know through the comment section. Thank you for reading.

Read Also:

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