What Are the 401(k) Beneficiary Rules?

You can designate a wide range of heirs for your 401(k)

When you sign up for a 401(k) plan at work, you’ll be asked to name beneficiaries: the people or other entities to inherit the account if you pass away.

When you first opened a 401(k), you may have overlooked the importance of naming the right beneficiaries and keeping that information up to date. In this guide, we’ll take you through what you need to know to ensure that your assets are passed on as you would like.

Key Takeaways

  • When you enroll in a 401(k), you’ll name beneficiaries to inherit your 401(k) if you die. 
  • Naming beneficiaries can keep your 401(k) out of probate court.
  • You can name almost anyone as your beneficiary: your children, your parents, siblings, a friend, or a favorite charity. 
  • If you are married, your spouse is assumed to be your beneficiary; you will need their permission to designate a different primary beneficiary. 
  • If you have minor children, they can’t inherit your 401(k) directly, so you may need to establish a trust.

Understanding 401(k) Beneficiaries

When you enroll in a new 401(k) plan, or move one from a previous employer, you’ll be asked to name beneficiaries. These are the people, or entities like a trust or a charity, that would inherit the 401(k) if you pass away.

You will be asked to name two types of beneficiaries:

A primary beneficiary: This is your first choice to receive the assets in the 401(k). If you are married, your primary beneficiary is presumed to be your spouse unless you specify otherwise and your spouse agrees in writing.

Contingent beneficiaries: These are one or more backup beneficiaries who will receive your 401(k) if your primary beneficiary dies before you or declines to accept the inheritance.  

You can name multiple people in each category, so you can split your inheritance between, say, your spouse and children. The amounts don’t have to be even but do have to add up to 100%. For example, you could specify that 80% should go to your spouse and the remaining 20% to charity.

If you die without naming beneficiaries, your 401(k) will likely end up in probate court. This can be an expensive, slow way to distribute your assets and the last thing that your grieving heirs may want to deal with.

Naming beneficiaries also gives you more control over how your assets will be distributed. Even if you have a will, naming 401(k) beneficiaries can make the inheritance process much quicker and less expensive. And if you don’t have a will, the distribution of your assets may be left to state law.


The beneficiary designations on your 401(k) accounts override any instructions for their disposition that you make in your will.

How to Choose 401(k) Beneficiaries

Depending on your personal situation, there are different rules to be aware of when naming a beneficiary. 

If You Are Single

If you are single, you can name almost any entity as your beneficiary: your parents, your children, siblings, a friend, or a favorite charity. Just make sure to review your designations periodically and keep them current. If you designate your parents, for example, and they pass away, you should update your beneficiaries as soon as possible.

As designated beneficiaries, most of these heirs will have two options for handling the inheritance: either transfer the assets to an inherited individual retirement account (IRA) or disclaim the account. If they transfer the money to an inherited IRA, they must generally withdraw all of it (and pay taxes on it) by the end of 10 years. If they elect to disclaim the account, they must do so within nine months of the account holder’s death.

Note that there are several exceptions to those timetables. Beneficiaries who are classified as eligible designated beneficiaries can take distributions over their life expectancy rather than in 10 years. In addition to a surviving spouse, individuals in that category include the owner’s child who is under age 18, a disabled or chronically ill individual, or any other beneficiary who is not more than 10 years younger than the deceased IRA owner. When minor children reach age 18, they must then take any remaining distributions within 10 years.

Entities like charities fall into the category of non-designated beneficiaries and are required to withdraw all the money within five years.

If You Are Married

If you are married, your spouse is assumed to be your primary beneficiary. If you haven’t designated a beneficiary, they will receive 100% of your 401(k) when you pass away.

It’s possible to pass on your 401(k) to someone other than your spouse, in whole or in part, but you will generally need your spouse’s permission to do so, in the form of a signed and notarized spousal waiver.

Your spouse has a wider range of options if they inherit your 401(k). In addition to the options made available to them as eligible designated beneficiaries, they can delay taking required minimum distributions (RMDs) until the later of (1) the end of the year when the deceased spouse would have had to start taking them, or (2) their own required beginning date for taking distributions.

If You Have Children

If you want to name your children as primary beneficiaries of your 401(k), you can, assuming that your spouse agrees. Otherwise, you can name your children as secondary beneficiaries. However, if they are still minors, they cannot inherit your 401(k) directly; a guardian must be provided to oversee the use of the funds (or the court will appoint one).

Setting up a trust in the children’s names, with the help of an attorney, is another possible solution. A trust also gives you some control over the age when the children will have access to the money. The Uniform Transfers to Minors Act (UTMA) governs this process in most states and controls how a designated custodian will manage the assets until the children are old enough to take over.

How do you change a 401(k) beneficiary?

You can change the beneficiary by filling out and submitting the appropriate forms. Your employer or plan administrator can supply the forms you need. You also may be able to complete the request to change your beneficiary online.

What happens if a 401(k) beneficiary doesn’t make withdrawals within 10 years?

If the beneficiary of your 401(k) is required to withdraw all of the money within 10 years and fails to do so, they may be subject to a 50% excise tax on the remaining balance.

Can a pet inherit your 401(k)?

Your pet cannot inherit your retirement account. However, you can provide for your pets by leaving an adequate amount of money for their care to someone you choose. You can also establish a pet trust.

The Bottom Line

When you enroll in a new 401(k), you’ll be asked to name one or more beneficiaries who will inherit your 401(k) if you die. It’s important to name beneficiaries because this can keep your 401(k) out of a potentially time-consuming and costly probate court process.

It’s also important to review your beneficiaries periodically and update them as needed. You can name almost anyone as your beneficiary: your spouse, children, parents, siblings, a friend, or a favorite charity. If you are married, your spouse is assumed to be your beneficiary, and you will need their written permission to designate a different person.

Article Sources
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  1. U.S. Department of Labor. “FAQs About Retirement Plans and ERISA,” Page 8.

  2. Internal Revenue Service. “5.5.2 Probate Proceedings.”

  3. American Bar Association. “The Probate Process.”

  4. American Bar Association. “Introduction to Wills.”

  5. Internal Revenue Service. “Retirement Topics — Required Minimum Distributions (RMDs).”

  6. U.S. Office of the Law Revision Counsel, U.S. Code, U.S. House of Representatives. “26 USC 2518: Disclaimers.”

  7. Internal Revenue Service. “Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs),” Page 9.

  8. Internal Revenue Service. “Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs),” Page 11.

  9. U.S. Social Security Administration. “SI 01120.205 Uniform Transfers to Minors Act.”

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