401(k) Beneficiary Designations
A Legal Moment

Who Gets My 401(k)?

   Whom you intend as a beneficiary of your 401(k) Plan is not always the same person as who IS your Beneficiary.

   The determination of who gets your 401(k) at your death depends on a combination of factors that include:  your current beneficiary designation and, for married 401(k) owners, certain government rules favoring spouses.  And if either of those do not yield a beneficiary, then beneficiary default provisions of your particular 401(k) plan, your Will provisions, or the intestacy succession laws of your State may come into play.  This edition of A Legal Moment looks at each of these nuances.

Your Beneficiary Designation
   When you enrolled in your 401(k) plan, you may have named a beneficiary to receive proceeds in case of your death.  If you have had a change in circumstances since that time -- for example, a divorce -- the originally-named beneficiary may no longer be appropriate.  As long as your currently named beneficiary is an eligible beneficiary, then that is who will receive your 401(k) proceeds, no matter how inappropriate or unintended such transfer is under your current situation—and no matter what your Will provides.  Therefore, it is important to make sure your most recent beneficiary designation is up-to-date with your plan provider. 

Beneficiary Eligibility:  Spousal rights to 401(k) under REA
   Unlike IRAs and Roth IRAs, there is an important restriction as to who qualifies as an eligible beneficiary for 401(k) plans of a married person.  Under the “Retirement Equity Act of 1984” (“REA”), if you are married, your surviving spouse is the only eligible beneficiary of your 401(k) upon your death -- no matter what the beneficiary designation states -- unless your spouse has signed a proper waiver and consent allowing you to name a different beneficiary. 
   On the one hand, the spousal rights under REA can happily “rescue” a beneficiary designation situation where the 401(k) owner never made a change to an old beneficiary designation and would have wanted the 401(k) to go to the spouse.  On the other hand, those same rights can upend intent if, for example, spouses in a second marriage agreed that their respective 401(k)’s should still go to their respective children as already named, but they neglected to execute the required waiver and consent forms.  Strict requirements must be followed in order for a spousal waiver to be effective.  And note that the spousal rights under REA can not be waived by a prenuptial agreement.
   There are a few limited exceptions to the applicability of REA to 401(k) plans, including, for example, if the 401(k) amount is less than $5,000; but it is also possible the terms of the 401(k) plan itself give the spouse beneficiary status even where REA does not apply.
401(k) Plan Beneficiary Default Provisions
   In the absence of a designated, living beneficiary, a 401(k) plan may provide for a “default” beneficiary or beneficiaries.  This is determined by the terms of the particular 401(k) plan.
Applicability of Will Provisions
   The applicability of the provisions of the 401(k) owner’s Will is zero, unless the owner’s Estate is named as the beneficiary or the beneficiary designation defaults to the owner’s Estate because the owner has no surviving spouse, or other living beneficiary designated, and there is no default beneficiary provided by the terms of the 401(k) plan itself.
Applicability of Intestacy Succession Laws
   If there is no living beneficiary for a 401(k) plan (and no default beneficiary is provided by the plan itself) and if the deceased 401(k) owner had no Will, then upon the default to the owner’s Estate (or if the Estate is the named beneficiary), ultimate distribution would depend upon the applicable laws of intestate succession.
   As the foregoing narrative attests, your beneficiary designation, or lack thereof, can have unintended consequences.  You may therefore want to confirm -- and update as necessary -- your 401(k) beneficiary designations with your plan provider.  If you are married and wish to name a beneficiary other than your spouse (and if your spouse agrees!), check with your plan provider to make sure the necessary spousal waiver and consent forms are in place.  Finally, it is a good idea review your 401(k) beneficiary designations on a regular basis to make sure they continue to conform to your wishes.

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Gay Vinson is an attorney at Marshall, Roth & Gregory, PC. Her practice is concentrated in trust and estate planning and administration.
  To receive more information on this topic or to suggest topics for future editions of "A Legal Moment," feel free to contact Gay by email ( or telephone (828.281.2100). 

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You may not rely on this content as legal advice for any specific situation, but should instead contact an attorney for specific advice.
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