top of page
Asset 4.webp

What Happens to My 401(k) If I Die?

Dec 10, 2024

3 min read

RetireAdvisers℠ of Pension Consultants, Inc.

It’s never fun to think about our possible untimely passing, but we have to plan for it. When you enrolled in your retirement plan, you were likely asked to name a beneficiary. Your beneficiary is who would receive your retirement account if you were to pass away.


Simple as that, right? Well, kind of. Naming your beneficiary is the critical first step, but it is vital to update it whenever you have a major life event, such as a marriage, divorce, etc.


What if I Never Name a Beneficiary?

If you pass away without a named beneficiary, your company’s 401(k) may have default beneficiaries in its plan documents. Many plan documents have a spouse named as a default beneficiary, or surviving children if you are single.


If your 401(k) doesn’t have default beneficiary provisions, your account becomes part of your probate estate. Probate is the legal process where your will is validated, and your assets are distributed. If you have no will, your assets, including your 401(k) will be subject to your state intestacy laws. Intestacy law is the set of rules that determine how a person's assets are distributed when they die without a will and can be ultimately costly and time consuming. If you name a beneficiary, the account bypasses probate and the person you name will be able to receive the assets relatively quickly.


Who Do I Name as Beneficiary?

It is your choice, but if you are married, your spouse has rights. If you wish to name someone other than your spouse as beneficiary, the Retirement Equity Act of 1984 requires that your spouse first give written consent.


If you are single or your spouse has given consent, you may name any person or entity you choose. It is popular to have a trust named beneficiary. It is not advisable to name a minor child as beneficiary, because they cannot directly inherit the funds. A court would appoint a guardian to manage the money until the child is legally able to inherit it. If you want the funds to go to a child, it would generally be better to name a trust as beneficiary and have the child be beneficiary of the trust. Speaking to an estate planning attorney can be helpful in determining if a trust is right for you.


Do I Need to Update My Beneficiary if I Have a Will?

Yes, you certainly do. For 401(k) accounts, the designated beneficiary takes priority over any instructions in a will. This means that even if your will leaves assets to a specific person, your 401(k) funds will go directly to the person named on your beneficiary form. If this designation is outdated or doesn’t reflect your wishes, the wrong person could inherit your retirement assets.


Take Mary’s story as an example. Mary had a 401(k) account she opened while married, naming her husband as beneficiary. After a divorce, she updated her will to leave everything to her daughter but forgot to change the beneficiary on her 401(k). When Mary passed away, her retirement savings went to her ex-husband, as he was still listed as the beneficiary, despite Mary’s intent in her will. This is a common scenario, where a simple oversight leads to assets going to an unintended recipient.


When Should I Update My Beneficiary Designation?

You should update your beneficiary whenever you have a major life event such as a marriage or divorce. Your financial circumstances and priorities may evolve over time, so it is also recommended to review your beneficiary elections at least once per year.


Why Keeping 401(k) Beneficiaries Updated Matters

Updating 401(k) beneficiaries is a straightforward, yet essential task to be certain that your savings reach the right people. A regular review can prevent unintended financial consequences and bring peace of mind, knowing your legacy is protected. For more information about estate planning, specifically how it applies to your assets, consider consulting with an estate planning attorney. If you have general questions about beneficiary elections, you can discuss them with a RetireAdvisers℠ consultant for guidance.


Authored by Jay Pinkston, CFP®


The concepts expressed herein represent the views and opinions of Pension Consultants, Inc., and are not intended as legal, tax, or investment advice for any specific individual, account, or plan.

Dec 10, 2024

3 min read

RetireAdvisers℠ of Pension Consultants, Inc.
RetireAdvisers_Color_RGB.png

RetireAdvisers℠ virtual guidance is for educational purposes only and does not include specific investment advice. Pension Consultants, Inc. is registered with the U.S. Securities and Exchange Commission as an investment adviser. The concepts expressed herein represent the views and opinions of Pension Consultants, Inc., and are not intended as legal, tax, or investment advice for any specific individual, account, or plan.

© 2025 by RetireAdvisers

(417) 245-2045

300 S. Campbell

Springfield, MO 65806

bottom of page