Employee Benefit Plans: The 411

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

Choosing a beneficiary

Choosing a beneficiary for your 401k is a task that should not be taken lightly. Failing to name a beneficiary could cause a nightmare for your loved ones. It is important to consider who you want the beneficiary and to make sure it is updated whenever significant life events happen.

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If you are married, the automatic beneficiary for your 401k is your spouse. If that is what you want, proper paperwork with your spouse’s name should still be completed to be safe. Your spouse will generally have the most options when it comes to deferring taxable distributions. In order to name someone other than your spouse, written consent from your spouse is necessary. This is important because even if there is another person named as the beneficiary, without written spousal permission, the court will recognize the spouse as the primary beneficiary regardless of what the form says.

Thinking about naming your kids as beneficiaries? As mentioned above, if you are married make sure to get your spouse to sign a waiver. For children, it is important to consider their ages. If they are minors there will need to be a guardian named to manage the funds until the children are of age. Also, do not forget to add children that are born after you initially fill out the form. Lastly, it is important to consider the tax implications that it will have on them.

See: Should a beneficiary blindly trust the trustee?

There is a lot to consider when naming a beneficiary. Remember to cover your bases now so that your loved ones are not shocked in the unfortunate event of your death. Take a minute to consider your options and decide what is right and make sure to update your forms and receive spousal consent when necessary.

If you need help, feel free to contact a Henry+Horne advisor. To learn more about how Henry+Horne can help you with choosing a beneficiary, as well as bolster your 401k, head over to our Estate Planning Services page.

 

Heather Ball