Does a 401(k) Really Require a Beneficiary? – Avoid This Mistake + FAQs

Confused about whether your 401(k) needs a beneficiary? You’re not alone.

According to a leading retirement plan provider, nearly one-third of 401(k) participants have no beneficiary listed, leading to probate delays and assets landing in unintended hands. Here’s what you’ll learn in this comprehensive guide:

• Why every 401(k) should have a beneficiary – and what federal law (ERISA) and IRS rules say about it.
• Costly beneficiary mistakes to avoid – like outdated names, missing spousal consent, or no contingent backup.
• Key terms demystified – primary vs. contingent beneficiary, spousal consent requirements, and required distributions for heirs.
• Real-world scenarios and court cases – who inherits the 401(k) in different family situations (and how courts have ruled).
• Comparisons and special rules – how 401(k) beneficiary rules differ from IRAs and pensions, state community property twists, plus a pros-and-cons breakdown of beneficiary options.

Quick Answer: Yes, You Need to Name a 401(k) Beneficiary (Here’s Why)

Yes. You should absolutely designate a beneficiary for your 401(k) – and in some cases, federal law effectively requires it.

Under the Employee Retirement Income Security Act (ERISA), if you’re married, your spouse is automatically your 401(k)’s beneficiary unless they consent in writing to someone else.

If you’re single (or your spouse waives their right), you can choose any beneficiary, but failing to name one means the plan’s default rules kick in.

Those default rules (often your surviving spouse, then children, or your estate) can lead to delays, probate, and even higher taxes.

Federal law and IRS regulations favor having a beneficiary on file so that your 401(k) bypasses probate and transfers directly to an individual. If no beneficiary is named, the account typically becomes part of your estate or follows a preset order of relatives, creating potential legal tangles.

Naming a beneficiary is crucial to ensure your 401(k) savings go to the right person quickly and with minimal hassle.

Common Mistakes to Avoid When Naming a 401(k) Beneficiary

Even small mistakes in naming your 401(k) beneficiary can wreak havoc on your estate plan. Avoid these common errors:

• Not naming a beneficiary at all: The biggest mistake is leaving the beneficiary section blank. Without a named person, your 401(k) likely defaults to your spouse or estate by plan rules, meaning your loved ones may face court procedures to claim the funds. Always fill out a beneficiary form – it’s usually part of your 401(k) enrollment or can be updated anytime.

• Failing to update after life events: Marriage, divorce, having children, or death of a beneficiary should trigger an immediate update. Many people forget to remove an ex-spouse or add new family members.

• If you divorce and don’t update the form, an ex-spouse could still inherit your 401(k). (Yes, that’s happened in court – ex-spouses have received retirement funds because the forms were never changed.) Review your beneficiary designations regularly, especially after any major life change.

• Ignoring the spousal consent rule: If you’re married and want to name someone other than your spouse as the primary beneficiary (for example, naming your child from a previous marriage), you need your spouse’s written, notarized consent.

• Skipping this step can invalidate your intended designation. The plan will default to your spouse unless a proper waiver is on file. Always follow your 401(k) plan’s spousal consent requirements to make sure your choice is legally recognized.

• Only naming a primary beneficiary (no contingent): Naming a primary beneficiary is great, but what if they pass away before you or at the same time? If you have no contingent beneficiary (backup) listed, your 401(k) could still end up in probate.

• Always list at least one contingent beneficiary to cover unforeseen situations. For example, you might list your spouse as primary and your children as contingent beneficiaries.

• Naming a minor child without a plan: You can name your children as beneficiaries, but if they’re minors at the time of your death, they can’t legally manage the money.

• Simply naming a young child (under 18 or 21, depending on state) can require a court-appointed guardian to oversee the account until the child comes of age. To avoid this, consider naming a trust for the child’s benefit or a custodial account under the Uniform Transfers to Minors Act (UTMA) as beneficiary. This way, a trusted adult or trustee can manage the 401(k) assets for the child.

• Assuming your will or living trust controls your 401(k): Many people think, “I have a will, so I don’t need to name a beneficiary.” Wrong. Your 401(k) beneficiary form trumps your will when it comes to who inherits that account. If your will says your daughter gets all your assets but your 401(k) form still lists your ex-spouse, guess who legally gets the 401(k)? The ex-spouse.

• Don’t rely on a will or trust alone – make sure your 401(k) form matches your intentions. (Similarly, prenuptial agreements or divorce decrees won’t override an updated beneficiary form unless they meet strict legal criteria like a QDRO.)

By avoiding these mistakes and keeping your beneficiary designations up-to-date, you ensure that your 401(k) savings will pass smoothly to your intended heirs.

Key Terms Explained: Primary vs. Contingent, Spousal Consent, and RMDs

Retirement and estate planning comes with a lot of jargon. Let’s break down some key terms related to 401(k) beneficiaries:

• Beneficiary: A person (or entity, like a trust or charity) designated to receive your 401(k) funds when you die. You can name one or multiple beneficiaries, and you can usually specify what percentage of the account each will get.

• Primary Beneficiary: The first in line to inherit your 401(k). This is who the plan administrator will try to pay out to immediately after your death. For example, you might name your spouse or a family member as the primary beneficiary. If you name multiple primary beneficiaries, they will share the account according to the percentages you set.

• Contingent Beneficiary: The backup beneficiary (or beneficiaries) who inherits the 401(k) only if the primary beneficiary has died or cannot accept the inheritance. Contingents get nothing if the primary beneficiary is alive and willing to take the account. It’s wise to name at least one contingent beneficiary in case your primary predeceases you or disclaims the funds. Think of it as a Plan B for your 401(k).

• Spousal Consent: A legal requirement under federal law (ERISA) for 401(k) plans when a married participant wants to name someone other than their spouse as the primary beneficiary. Because 401(k)s are designed to protect spouses, the default rule is that a spouse has rights to the account. Spousal consent means your husband or wife signs a waiver (often in front of a notary or plan representative) giving up their automatic claim so you can name a different beneficiary. Without this consent, a non-spouse beneficiary designation won’t be valid on many 401(k)s – the spouse would still be entitled to the money. (Note: IRAs don’t have this federal requirement, but 401(k)s do, unless your spouse formally waives it.)

• Required Minimum Distributions (RMDs) for Beneficiaries: “RMDs” are the minimum amounts that must be withdrawn from certain retirement accounts each year once you reach a certain age (currently 73 for most individuals, under recent law changes). When you die, your beneficiaries may also be subject to distribution rules. A spouse beneficiary has special flexibility – they can roll the 401(k) into their own IRA and delay RMDs until they reach RMD age, or even treat the account as if it were their own. Non-spouse beneficiaries (like children or siblings) usually can’t stretch the withdrawals over their lifetime anymore. Under the SECURE Act of 2019, most non-spouse beneficiaries must withdraw all funds from an inherited 401(k) or IRA within 10 years of the original owner’s death. (There are exceptions for certain “eligible designated beneficiaries” like minor children, disabled individuals, or those not much younger than the owner – they can take distributions over longer periods in some cases.) What this means practically: if your adult child inherits your 401(k), they can keep it growing tax-deferred for up to ten more years, but by the end of that period the account must be emptied, potentially creating a tax impact in that timeframe. A spouse, by contrast, could roll it over and stretch distributions over decades.

Understanding these terms will help you make informed decisions and avoid surprises. Next, let’s look at how these concepts play out in real-world situations.

What Happens to Your 401(k) in Different Beneficiary Scenarios?

To truly grasp the importance of naming the right beneficiary, consider these common scenarios and how a 401(k) would be passed on in each case:

Scenario 1: Married with No Beneficiary Named

Suppose you never filled out a beneficiary form for your 401(k), and you die while married.

Who gets the money? By federal law, your spouse automatically inherits your 401(k). Even without a form, ERISA protects spouses by giving them the first claim. Your 401(k) plan will typically transfer the balance to your surviving husband or wife with minimal fuss.

The spouse can roll it over into their own IRA or 401(k) and continue the tax-deferred growth. (If you wanted someone else to get it instead, tough luck – without that spousal consent waiver and a named beneficiary, your spouse’s right is locked in.)

Scenario 2: Married and Want to Name Someone Else

Now imagine you’re married but want your 401(k) to go to your children from a prior marriage, not your current spouse. Can you do that?

Yes, but only if your spouse signs off on it. You would name your children as primary beneficiaries and have your spouse sign a spousal consent form waiving their claim.

With that consent on record, your kids would inherit the 401(k) when you die. If you fail to get consent (or forget to file it properly), the plan will ignore your attempted designation of the kids and give the account to your spouse instead.

Always ensure the paperwork is done correctly in this situation. If done right, upon your death, each child would receive their specified percentage of the account (they could roll their shares into inherited IRAs and use the 10-year rule for withdrawals).

If done wrong, your spouse could legally take the entire account despite your intentions.

Scenario 3: Unmarried with No Beneficiary

You’re single (no spouse) and you neglected to name any beneficiary on your 401(k). In this case, there’s no automatic spouse default. So what happens?

Typically, the plan’s default beneficiary rules kick in. Most 401(k) plan documents have an order of precedence if you didn’t choose someone: often it’s your children, if you have any; if not, then perhaps your parents; if none, then your estate.

It varies by plan – some plans simply send the assets to your estate outright. Let’s say you have two adult children and no named beneficiary. The plan might divide the account equally between them as the default. But if the plan defaults to your estate, then the 401(k) goes into your probate estate and will be distributed according to your will (or state intestacy law if no will).

This process can be slow and costly, and your heirs might not be able to access the funds until the estate is settled. Plus, a 401(k) that pours into an estate loses some tax advantages – for example, an estate (or non-individual) beneficiary usually must withdraw the money on a faster schedule (often within 5 years).

The key takeaway: if you’re unmarried, name a beneficiary (or multiple) to avoid your hard-earned savings getting stuck in legal limbo.

Scenario 4: Unmarried with a Named Beneficiary 

If you’re single and do name a beneficiary (say, your sister or a close friend), things are straightforward. When you pass, the 401(k) will immediately pay out to the person you named.

No probate, no court – the beneficiary just works with the plan administrator to transfer the account or receive a distribution. They’ll have to pay taxes on withdrawals, but they at least have control and can time withdrawals within the allowed 10-year window to minimize taxes.

This scenario is the smoothest: the funds go right where you wanted. It highlights why even singles should designate someone; otherwise the previous scenario (no beneficiary) applies.

Scenario 5: After a Divorce (Outdated Beneficiary) 

This is a cautionary tale. Imagine you named your spouse as your 401(k) beneficiary while married.

Years later you get divorced, but you forget to update your beneficiary form. You might assume the divorce decree or state law ensures your ex won’t get your 401(k). Unfortunately, for 401(k)s, that assumption can be dead wrong.

Under ERISA, the plan is obligated to pay whoever is listed on the official beneficiary form, even if that person is now your ex-spouse. Many states have laws that automatically revoke an ex-spouse’s beneficiary rights upon divorce for things like life insurance or IRAs, but those laws do not apply to ERISA-covered 401(k) plans.

There have been court cases where ex-spouses received 401(k) funds because the participant never changed the form after divorce. For example, the U.S. Supreme Court in Kennedy v. Plan Administrator for DuPont (2009) upheld that a plan must follow the beneficiary form on file.

In that case, a man’s ex-wife (still named on his 401(k) form) got the entire account, even though his will and divorce papers indicated he wanted his daughter to inherit it.

The lesson: always update your 401(k) beneficiary after a divorce (and send the updated form to your plan administrator). Otherwise, your ex could unintentionally become the beneficiary of your retirement savings.

Scenario 6: Minor Children as Beneficiaries 

Suppose you’re a single parent and you name your two young kids as beneficiaries. If you pass away while they’re still minors, they will inherit the 401(k) – but not directly.

Because minors can’t legally control large financial assets, a guardian or custodian will be needed to manage the 401(k) funds on their behalf until they reach adulthood. There are a few ways this plays out.

If you planned ahead, you might have set up a trust in your will (a testamentary trust) or a living trust to receive the 401(k) assets for your kids. In that case, the trust (managed by a trustee you chose) will receive the money and use it for your children’s benefit per your instructions.

If you didn’t set up a trust or name a custodian, then a court will likely appoint a guardian of the estate for your children to oversee the funds. The 401(k) plan might require the funds to be distributed (since it can’t hold an account titled to a minor); they could go into a blocked account or investment under the guardian’s control.

The children will get access to what’s left when they reach the age of majority. One important note: a minor child of the account owner is treated as an “eligible” beneficiary under current IRS rules, meaning the child could stretch out withdrawals until at least age 18 (at which point the 10-year clock would start).

Still, the practical issue is management of the funds. Tip: if you’re considering naming young children, it’s often wise to name a trust or an adult custodian to manage the 401(k) money for them.

This ensures the funds are used wisely for the kids (and not handed to them in a lump sum on their 18th birthday).

Scenario 7: Naming a Trust or Estate as Beneficiary 

Maybe you have a revocable living trust as part of your estate plan, or you figure leaving your 401(k) to your estate will make things simple.

How do these choices pan out? If you name your estate as the beneficiary, the 401(k) proceeds will go into your probate estate when you die. That means court-supervised distribution according to your will (or state law if no will).

This route is generally slower and more costly due to legal fees, and the funds are exposed to estate creditors. Tax-wise, an estate isn’t a “designated beneficiary” under IRS rules, so the entire 401(k) likely must be paid out in a short time frame (often within 5 years).

Naming the estate is usually a last resort if no individuals or trusts are suitable; it’s typically better to name a person or a trust. If you name a trust as beneficiary, the plan will pay the 401(k) into the trust upon your death.

The trust’s terms will then govern how and when the money gets to the actual people you intend to benefit. This can be great for controlling the funds (e.g., “hold the money until my son is 25, then distribute income yearly…” etc.), protecting assets from spendthrift heirs or providing for special needs beneficiaries without disrupting their benefits.

However, setting up a trust needs careful drafting: to get the best tax treatment, the trust should qualify as a “see-through” (or look-through) trust under IRS rules, meaning the beneficiaries are individuals and certain documentation is provided to the plan administrator.

If done correctly, the IRS will treat the trust’s beneficiaries as if they were named directly, so their life expectancy or the 10-year rule applies similarly. If done incorrectly, the trust might have to withdraw the 401(k) assets in as little as 5 years, potentially causing a big tax hit.

Also, trusts have their own tax brackets (often higher on income if the money isn’t distributed to beneficiaries annually). So while naming a trust can be very useful, it introduces complexity.

Be sure to consult an estate planning attorney if you go this route.

As you can see, who you name – or fail to name – as your 401(k) beneficiary can drastically change what happens to your money.

These scenarios underline a core principle: keep your beneficiary designations updated and aligned with your wishes. It spares your loved ones from legal headaches and ensures the smooth transfer of your retirement assets.

Court Cases Highlighting the Importance of Proper Beneficiary Designations

If the scenarios above aren’t convincing enough, let’s briefly look at real court rulings that drive home how crucial your beneficiary choice is:

• Ex-Spouse vs. Current Family – The Unchanged Form: Kennedy v. Plan Administrator for DuPont (U.S. Supreme Court, 2009) is a famous case every retirement planner cites. In this case, a man’s ex-wife remained the named beneficiary on his employer’s savings plan (a 401(k)-type plan) even after divorce. When he died, his daughter (and executor) argued that the ex-wife had waived her rights in the divorce and that the money should go to the estate (for the daughter).

• The Supreme Court unanimously sided with the plan administrator, who had paid the balance to the ex-wife because she was still the designated beneficiary on the plan’s records. The Court held that ERISA requires plans to follow the plan documents (the beneficiary form) strictly, and it wouldn’t recognize an “implied” waiver without a proper Qualified Domestic Relations Order (QDRO). In short, the ex-wife got the 401(k) funds, and the daughter got nothing, all because the form was never updated.

• This case underscores that your beneficiary form is legally binding, often regardless of other documents or even divorce agreements, so you must keep it current.

• State Law vs. Federal Law – Revoking an Ex-Spouse: Many states have statutes that automatically revoke an ex-spouse’s beneficiary status upon divorce (to prevent exactly the above scenario).

• However, Egelhoff v. Egelhoff (U.S. Supreme Court, 2001) proved that those state laws don’t apply to ERISA plans. In that case, a divorced man had not changed his pension and life insurance beneficiaries, which still named his ex-wife. Washington state law said that after divorce, an ex-spouse is treated as if predeceased (so she wouldn’t get the benefits).

• The Supreme Court ruled that ERISA preempts (overrides) state laws like that for any ERISA-governed plan. Result: the ex-wife was entitled to the benefits because of the still-effective beneficiary designation.

• The takeaway: for 401(k)s and similar plans, do not rely on state law to fix your beneficiary after a divorce – you must change it yourself. (For IRAs or other non-ERISA accounts, state laws might remove an ex-spouse, but it’s still best practice to update all accounts promptly.)

• Community Property Complications – First Marriage vs. Second: In community property states (like California, Texas, etc.), a spouse typically has a right to half of the marital assets. But ERISA can even preempt those rights when it comes to retirement plans.

• A landmark case, Boggs v. Boggs (U.S. Supreme Court, 1997), involved a second wife and the children from a first marriage. The first wife had died and willed her community property interest in her husband’s pension to their sons. After the husband died, the second wife and the sons fought over the pension.

• The Supreme Court held that ERISA trumped the state’s community property law; the second wife (the surviving spouse at the time of the participant’s death) was entitled to the pension benefits, and the children were not. In essence, an ex-spouse (or their heirs) couldn’t direct the pension to someone else once the participant was still alive and later died married to someone new.

• This case illustrates that under ERISA, the rights of a current spouse to retirement benefits cannot be undermined by state property laws or even a prior spouse’s will.

These cases (and many others in lower courts) all point to the same moral: the beneficiary designation on your 401(k) is powerful. It determines who gets the money, often to the exclusion of all other factors.

Courts will enforce that designation to the letter, barring a very narrow set of exceptions (like a valid QDRO or clear evidence of fraud). So choose wisely, update regularly, and keep documentation in order.

401(k) vs. IRA vs. Pension: How Beneficiary Rules Differ

Not all retirement accounts play by the same rules. It’s helpful to compare how 401(k) beneficiary rules stack up against other retirement plans like IRAs and pensions:

• 401(k) Plans (Employer-Sponsored Defined Contribution Plans): As we’ve discussed, if you’re married, your spouse has an automatic claim as primary beneficiary unless they waive it. If you want to name someone else, spousal consent is generally required. 401(k)s are subject to federal ERISA law, which standardized these spousal protections and ensures that plan beneficiary designations override state laws.

• Distribution options for beneficiaries can include leaving the money in the plan (some plans allow beneficiaries to maintain an inherited account for up to 10 years), or rolling it into an inherited IRA. Under the current law (SECURE Act), most non-spouse beneficiaries must empty the account within 10 years.

• Spouses can roll over to their own IRA or remain in the plan as a beneficiary with more flexible withdrawal timing.

• Traditional and Roth IRAs (Individual Retirement Accounts): IRAs are not governed by ERISA, which means the spousal consent rule does not apply at the federal level.

• If you have an IRA, you can name anyone as your beneficiary without needing your spouse’s approval (if married). However, be cautious: in community property states, your spouse may have rights to half the IRA’s value if it was funded with marital earnings.

• Some IRA custodians in those states require the spouse to sign a waiver when someone else is named, to avoid future disputes. But legally, an IRA provider won’t reject your beneficiary choice due to lack of consent in most cases. Another difference: state laws that revoke an ex-spouse’s beneficiary status upon divorce do apply to IRAs in many states, since ERISA preemption isn’t a factor.

• That means if you divorce and forget to change your IRA beneficiary from your ex, in some states the ex would be treated as having predeceased (though it’s still advisable to update it manually!).

• In terms of distribution, IRAs follow similar post-death rules as 401(k)s – spouses can do a rollover to their own IRA, non-spouses typically use the 10-year rule (with the same exceptions for eligible beneficiaries), and if no beneficiary is named, the IRA usually defaults to the owner’s estate (with a 5-year payout rule if the owner died before starting RMDs, or continuing RMD schedule if after).

• One more note: IRAs allow you to name a trust or charity just like a 401(k), but again, careful planning is needed for trusts to get favorable tax treatment.

• Pensions (Defined Benefit Plans): Traditional pension plans have their own set of spousal protections. In fact, under federal law, a married participant’s pension must be paid in a way that provides for the spouse (typically a joint-and-survivor annuity) unless the spouse consents to another form.

• If you die before retiring, pensions usually pay a pre-retirement survivor annuity to your spouse. You often can’t name an alternate beneficiary for a pension death benefit without spousal waiver, or at all in some cases.

• Some pensions have a lump-sum death benefit that can be paid to a beneficiary; if you’re married, guess who’s first in line? The spouse, again by law.

• Unmarried pension participants can name any beneficiary for survivor benefits if the plan allows. In short, pensions are even more strict about defaulting to the spouse.

• And since pensions provide a stream of income (annuity), the concept of multiple beneficiaries or splitting is less common – it’s usually a spouse gets a percentage for life, or you can opt out with consent.

• 403(b) and 457 Plans: These are cousins of the 401(k) – 403(b) for nonprofits and schools, 457(b) for government or certain nonprofits.

• If a 403(b) or 457(b) is subject to ERISA (some are, some aren’t – government plans are exempt from ERISA), the spousal beneficiary rules will resemble the 401(k). If not subject to ERISA (e.g., a government 457 or a church 403(b)), then spousal consent isn’t federally required, but again state laws or plan policies might impose something.

• Generally, it’s safest to assume your spouse should be your primary beneficiary on any retirement plan unless you explicitly change it with the proper process.

• Thrift Savings Plan (TSP): For U.S. federal employees and military, the TSP is like a 401(k). Interestingly, TSP has its own federal rules: if married, the default is the spouse gets the entire account unless the spouse consents to you naming someone else (sound familiar?).

• If no beneficiary form is on file, TSP (by law) pays out in a set order: spouse, then children, then parents, then estate. So even outside ERISA, many plans follow similar structures to favor spouses and immediate family.

401(k)s and similar employer plans come with stronger spousal protections due to ERISA, whereas IRAs are more individually controlled but still can be influenced by state marital property laws.

The common thread: always designate beneficiaries on every retirement account – be it 401(k), IRA, or pension – and know the rules that apply to each so your wishes are carried out.

State Laws and Community Property: Do They Affect Your 401(k) Beneficiary?

Estate and family laws can vary widely by state, but when it comes to an ERISA-governed 401(k), federal law will mostly reign supreme. Here are some state-specific considerations:

• Community Property States: If you live in a community property state (such as Arizona, California, Texas, Washington, Louisiana, and others), any asset acquired during marriage is generally half-owned by your spouse.

• With IRAs or other non-ERISA assets, this means your spouse might have a right to a portion of the account even if they’re not named as beneficiary. For instance, a spouse could potentially challenge an IRA beneficiary designation that gives 100% to someone else, claiming it violates their 50% community property right (especially if no spousal consent was given).

• To avoid fights, financial institutions in these states often ask for spousal consent for IRA beneficiary choices, even though not federally required. However, for a 401(k) (ERISA plan), community property claims are largely preempted.

• The federal rule requiring spouse as default (or spouse’s written waiver) essentially addresses the spousal right. If you’ve properly waived or the spouse isn’t the beneficiary by their own consent, a surviving spouse in a community property state cannot later assert a claim to the 401(k) benefits by state law – ERISA has already determined who gets it.

• Revocation-on-Divorce Statutes: Many states have laws that if you get divorced, any mention of your ex-spouse in beneficiary designations (and even in your will) is automatically nullified, as if the ex died before you.

• These laws aim to prevent accidental windfalls to exes. Crucially, these laws do NOT apply to ERISA plans like 401(k)s. As noted with Egelhoff, ERISA overrides state statutes in this realm.

• So if you forget to update your 401(k) after divorce, the state can’t step in – your ex stays the beneficiary until you change it. On the other hand, those laws do apply to things like IRAs, life insurance policies, or other accounts not under ERISA.

• So, post-divorce, your ex might be automatically removed as an IRA beneficiary in some states (check your state’s law), but not so for a 401(k).

• Best practice: regardless of state law, update all account beneficiaries after a divorce or major breakup to reflect your current wishes.

• Inheritance and Probate Laws: If a 401(k) ends up being paid to your estate (due to no beneficiary or all beneficiaries predeceasing you), then state probate law decides who inherits under your will or intestacy (if no will).

• State law will also govern things like what happens if a beneficiary predeceased you and you didn’t update (does their share go to their children or does it lapse to others? – some beneficiary forms allow a per stirpes designation, otherwise the plan or state law dictates).

• These scenarios only come into play if you didn’t keep your beneficiary form updated or left ambiguities. Again, keeping your designations current and naming contingents can avoid having to deal with varying state inheritance rules.

• Community Property & Pensions Exception: One nuance: while a community property state cannot redirect an ERISA plan’s beneficiary payout via state law, spouses in those states often still have to consent to any change of beneficiary for a 401(k) – which is already required by ERISA.

• So practically, you won’t be allowed to name someone else without your spouse’s signature if you live in such a state and the plan knows you’re married.

• Also, note that community property states may affect how retirement contributions are divided in a divorce (through a QDRO for a 401(k) or splitting an IRA), but that’s during life/legal separation, not at death. Once you pass away, if you’re still married, the above spousal beneficiary rules apply irrespective of state property regimes.

• State Taxes: A quick point on state estate taxes – a few states impose their own estate or inheritance taxes. Leaving a 401(k) to a spouse is typically tax-free (spouses usually are exempt from estate tax).

• But leaving it to others could incur state inheritance tax in places like Pennsylvania or Nebraska, or contribute to a taxable estate in a state with an estate tax (like Illinois or Massachusetts) if your estate is large.

• This is just a side consideration: naming a spouse as beneficiary has not only federal tax deferral advantages but also state tax benefits in terms of estate taxes.

In conclusion, state laws can influence non-ERISA accounts and what happens if you fail to name a beneficiary, but for your 401(k), the federal framework (ERISA) controls most aspects. Don’t rely on state default rules to save you; make your wishes explicit through proper beneficiary designations.

Pros and Cons of Different 401(k) Beneficiary Options

When choosing a beneficiary, you have several options – each with its own advantages and disadvantages. Here’s a quick comparison of common beneficiary types:

As the table shows, each choice has trade-offs. Many people name a mix of beneficiaries (for example, a spouse as primary and kids as contingent, or split percentages among children and a charity) to balance these factors.

Think carefully about your goals – whether it’s providing for a spouse, educating children, controlling the money via a trust, or contributing to a cause – and pick the beneficiary setup that best achieves those aims. And remember, you can change your mind and update the form as life evolves.

401(k) Beneficiary FAQs

Does a 401(k) require a beneficiary?
Yes. While not “mandatory” to list one, you absolutely should. If you’re married, your spouse is automatically the beneficiary by law (unless they consent otherwise). Naming a beneficiary ensures your 401(k) passes to who you intend without delay.

What happens if I don’t name a beneficiary for my 401(k)?
If no beneficiary is on file, the plan’s default rules apply. Typically, your spouse inherits (if you’re married), or the account goes to your estate or next of kin. This often means a probate process and slower access to the funds.

Is my spouse automatically my 401(k) beneficiary?
Yes. Under federal law, a current spouse is the automatic beneficiary of a 401(k) (and other ERISA retirement plans) unless they sign a waiver. This protects spouses, ensuring they receive the 401(k) assets if you pass away first.

Can I name someone other than my spouse as 401(k) beneficiary?
Yes, but only with your spouse’s written, notarized consent (if you’re married). Without spousal consent, an attempt to name another person will be invalid for a 401(k). If you’re single, you can name anyone freely.

Can I have multiple beneficiaries on my 401(k)?
Yes. Most plans allow you to designate multiple primary beneficiaries (and multiple contingent beneficiaries). You can specify each person’s percentage share (make sure it totals 100%). This is common if you have several children or want to include a charity alongside family.

Does a will override my 401(k) beneficiary form?
No. The beneficiary designation on your 401(k) supersedes your will for that account. The 401(k) will be paid directly to whoever is named on the plan’s form, even if your will says otherwise. Always align your beneficiary forms with your estate plan.

Should I name a contingent beneficiary for my 401(k)?
Yes. It’s wise to name at least one contingent (secondary) beneficiary. If your primary beneficiary dies before you or cannot inherit, the contingent beneficiary will receive the account. This backup step ensures your 401(k) still goes where you want, even if circumstances change.

Can I name my minor children as 401(k) beneficiaries?
Yes, you can, but remember that minors can’t manage the assets. A guardian or custodian will be needed to handle the money until they reach adulthood. To avoid complications, some parents use a trust or custodial arrangement when naming minors.

Do beneficiaries pay taxes on an inherited 401(k)?
Yes, typically. A 401(k) inheritance (traditional 401(k)) is generally taxable to the beneficiary as they withdraw funds, just like it would be to the original owner. There’s no early withdrawal penalty for beneficiaries, but the income tax is due on distributions. (Exception: if it’s a Roth 401(k), qualified withdrawals can be tax-free, but those usually would be inherited via Roth IRA rollover.) Spouses who roll over to their own IRA will eventually pay tax when they withdraw, as usual.

Does a 401(k) ever go through probate?
Not if you’ve named a living beneficiary. The account will transfer directly to that person. But if you failed to name a beneficiary (and there’s no spouse by default or no living default heirs), the 401(k) could end up in your estate and go through probate. That’s why keeping your beneficiary designations updated is so important – it keeps your 401(k) out of probate court.

Can an ex-spouse still be my 401(k) beneficiary after divorce?
Yes, absolutely – if you don’t remove them, they remain the beneficiary. Divorce alone doesn’t void a 401(k) beneficiary designation under federal law. To ensure an ex-spouse doesn’t get your 401(k), you must submit a new beneficiary form (often after the divorce is final, as required by plan rules).

How often should I review or update my 401(k) beneficiaries?
Check your beneficiary designations at least once a year and after any major life event (marriage, divorce, birth of a child, death of a previous beneficiary, etc.). Regular check-ins ensure that no matter what happens in your life, your 401(k) will go to the right person.