How To Make a Family Member a 401k Beneficiary

When planning your financial future, you must be very careful with all of your assets and this includes a 401k. Often we make plans for our own financial future, but we sometimes leave the financial future of loved ones up to fate. There are ways of protecting their future, especially in the event of your death. You should plan everything carefully, including the beneficiary of any 401k plan you may have.

The 401k is very common these days, and often you will find an employer that offers this option to you. When you set it up, you are asked for the name of a beneficiary who will receive the money from this 401k should you die.  However, naming a beneficiary is not always as easy as it seems, or as secure as you might think. Issues arise when the family member you make a beneficiary has passed on before you, when you divorce, or even when you are a single parent and your children are under age.  To ensure that you set your beneficiaries correctly you should consult with a tax attorney prior to following these steps. An attorney will charge you a small fee, but it is much better to be safe, and secure your family than to have them be left at a loss because of your oversight.

With regards to the 401k, federal laws stipulate that the control of any 401k after a death automatically reverts to a spouse. This does not mean you should forget about assigning a beneficiary. When planning on assigning some other beneficiary who is not your spouse, you need to sign a waiver form.  It is not enough to state your requirements in a will. A file requesting the name of the other party must be officially submitted. This is especially important when you are separated, yet not legally divorced. When you have not submitted this waiver then your spouse will get your 401k regardless of who you named as beneficiary.

Have a will drawn up and make sure the waiver is submitted. Remember even if you have children, and if you marry again, your children will not get your 401k if you have not done the waiver, and written your desires in your will. Federal law states that spouses take precedence unless it is specified in writing and procedures have been followed.  To obtain more relevant information you should read the IRS information on 401k accounts.  Be prepared and your heirs will not have any problems should anything happen to you.


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