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Author: clovecigs One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 25223  
Subject: Any Help Appreciated Date: 7/7/2007 9:42 PM
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Ok gang, I need some help here. What happens to your 401(k) if you have no named beneficiary and die? Would it go to your surviving spouse, child(ren) from a previous marriage, estate? I have no clue and would appreciate any help.

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Author: clovecigs One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22103 of 25223
Subject: Re: Any Help Appreciated Date: 7/7/2007 9:45 PM
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Sorry for the second post guys and gals, but I am also interested in authoritative texts in this field also. Thanks again in advance.

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22104 of 25223
Subject: Re: Any Help Appreciated Date: 7/7/2007 11:35 PM
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It would become part of your estate and would be handled in accordance with the provisions of your will. If there is no will it would be handled in accordance with the probate provisions of your state of residency.

Bob

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Author: PayingFool Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22105 of 25223
Subject: Re: Any Help Appreciated Date: 7/8/2007 8:21 AM
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What happens to your 401(k) if you have no named beneficiary and die? Would it go to your surviving spouse, child(ren) from a previous marriage, estate?


Per ERISA, absent a signed waiver, the surviving spouse is always the beneficiary of a 401(k). I'm sure your 401(k) plan's beneficiary form includes text explaining this provision and provides a waiver section that may be signed by your spouse.

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Author: foolazis Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22106 of 25223
Subject: Re: Any Help Appreciated Date: 7/8/2007 1:39 PM
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What happens to your 401(k) if you have no named beneficiary and die?

It becomes part of your estate and is distributed along with your other assets. One gotcha with not having a named beneficiary is that the entire balance of the 401(k) must be distributed within 5 years, which can result in a serious tax hit for your heirs. A named beneficiary has the option to stretch the distributions over nis/her lifetime. You never want a 401(k) to just be left to your estate. Always designate a beneficiary or beneficiaries, but make sure that you keep track of your designation and review them periodically, just like you should review your will.

foolazis

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Author: clovecigs One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22107 of 25223
Subject: Re: Any Help Appreciated Date: 7/8/2007 2:30 PM
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"Per ERISA, absent a signed waiver, the surviving spouse is always the beneficiary of a 401(k). I'm sure your 401(k) plan's beneficiary form includes text explaining this provision and provides a waiver section that may be signed by your spouse"--PayingFool

After doing some online legal research, this is the answer I came up with, although it certainly sounds arbitrary. I assumed it would be distributed according to your will, or if none through the state's intestacy statutes. Quite the contrary, however, because according to 29 USCS Section 1055, "in the case of a vested participant who dies before the annuity starting date and who has a surviving spouse, a qualified preretirement survivor annuity shall be provided to the surviving spouse of such participant."

What I have yet to find is how much of the plan the surviving spouse will receive. Will he/she get the entire amount or only part of the account? And since there was no named beneficiary it sounds like from the other posts some pretty big tax hits are in the near future.

Any further help will certainly be appreciated, and thank you guys/gals so much for the replies.


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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22108 of 25223
Subject: Re: Any Help Appreciated Date: 7/9/2007 12:17 PM
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It would become part of your estate and would be handled in accordance with the provisions of your will. If there is no will it would be handled in accordance with the probate provisions of your state of residency.

Bob, you normally are one person I defer to on issues such as this, but you are incorrect in this case -- 401k accounts pass directly to a surviving spouse unless there is a signed statement waiving their status as the automatic beneficiary. I am virtually certain this even supersedes a named beneficiary that is not the surviving spouse. Basically, the only way a 401k can pass on to someone other than the surviving spouse is to have the signed statement.

If there is no surviving spouse *and* no named beneficiaries, it would then pass into the estate.

Acme

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22109 of 25223
Subject: Re: Any Help Appreciated Date: 7/9/2007 12:18 PM
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Per ERISA, absent a signed waiver, the surviving spouse is always the beneficiary of a 401(k). I'm sure your 401(k) plan's beneficiary form includes text explaining this provision and provides a waiver section that may be signed by your spouse.

Right...and this is why people need to be careful when they have a named beneficiary (say children from a prior marriage) and then get married. Their beneficiary information becomes irrelevant unless they get the new spouse to sign the waiver.

Acme

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22110 of 25223
Subject: Re: Any Help Appreciated Date: 7/9/2007 2:20 PM
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Bob, you normally are one person I defer to on issues such as this,

Well, that is your mistake for the day. ;-)

but you are incorrect in this case

Thanks for the correction.

Bob

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Author: clovecigs One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22111 of 25223
Subject: Re: Any Help Appreciated Date: 7/9/2007 3:25 PM
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Acme, great post...
but does the surviving spouse get the ENTIRE amount of the plan?

Thanks

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22112 of 25223
Subject: Re: Any Help Appreciated Date: 7/9/2007 3:34 PM
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but does the surviving spouse get the ENTIRE amount of the plan?

The surviving spouse does inherit the entire amount of the plan. However, because it's a pre-tax account, the spouse will have to pay taxes on the money as it's withdrawn.

The surviving spouse, and any non-spouse named beneficiaries would be able to roll over an inherited 401(k) or other qualified retirement plan to an inherited IRA and would have the opportunity to take the distributions out over the course of their lifeime. But they will still have to pay taxes on it.

AJ

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Author: clovecigs One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22113 of 25223
Subject: Re: Any Help Appreciated Date: 7/9/2007 3:44 PM
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Thank all you guys SO much for all the help.

Joel

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22114 of 25223
Subject: Re: Any Help Appreciated Date: 7/9/2007 5:35 PM
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Acme, great post...
but does the surviving spouse get the ENTIRE amount of the plan?


Thanks. AJ has already provided and excellent explanation of the different options for how the spouse handles things from there.

The one key piece that bears repeating -- any untaxed money in the 401k will eventually be taxed. It does not matter if the inherited funds are below the estate tax limits; since the funds were saved pre-tax, they will be taxed eventually.

Acme

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Author: SJColeman Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22115 of 25223
Subject: Re: Any Help Appreciated Date: 7/9/2007 9:22 PM
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Ok gang, I need some help here. What happens to your 401(k) if you have no named beneficiary and die? Would it go to your surviving spouse, child(ren) from a previous marriage, estate? I have no clue and would appreciate any help.

Welcome to the world of confusing responses ;-) The real answer is that it depends on your 401k plan. You need to bug the administrators of your plan. I said bug because the first line of support at your help line might not know the answer.

For example in my employer's plan you can name a beneficiary. If you want to name someone other than, or in addition to, your spouse as your beneficiary, you must have a spousal consent form.

If you haven't named a beneficiary or your named beneficiary dies before you, your account is paid in this order when you die: your spouse, your child(ren), in equal shares, your surviving parent(s), in equal shares and lastly your estate.

I think the above paragraph would answer your question if you are in the same 401k plan as I am. BTW they had changed the no beneficiary section within the last five years. In the past your surviving siblings received equal shares before your estate.

You really need to check you plan.

-- SJ Coleman

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22116 of 25223
Subject: Re: Any Help Appreciated Date: 7/9/2007 9:59 PM
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The real answer is that it depends on your 401k plan.

This is not true. Most aspects of 401k plans are dependent upon the options chosen by the company and/or administrator, but this is not one such item. The Federal laws that govern 401k plans lay out exactly how the accounts are distributed; all 401k plans must follow this process.

Acme

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Author: W401K Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22117 of 25223
Subject: Re: Any Help Appreciated Date: 7/10/2007 10:27 PM
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The rules governing how a 401k is distributed in the event of the death of a participant are not chosen on the Plan level. Beneficiary payments are governed by ERISA. The ERISA designation allows the 401k beneficiary form to override a Will. Make sure you keep this form updated for life changes such as marriage, divorce, children, etc.

Bill

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Author: SJColeman Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22128 of 25223
Subject: Re: Any Help Appreciated Date: 7/14/2007 9:53 AM
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Acme wrote:

This is not true. Most aspects of 401k plans are dependent upon the options chosen by the company and/or administrator, but this is not one such item. The Federal laws that govern 401k plans lay out exactly how the accounts are distributed; all 401k plans must follow this process.

I stand corrected. in that case what I wrote was based on my current 401k plan and is true for all plans. Namely:

you can name a beneficiary. If you want to name someone other than, or in addition to, your spouse as your beneficiary, you must have a spousal consent form.

If you haven't named a beneficiary or your named beneficiary dies before you, your account is paid in this order when you die: your spouse, your child(ren), in equal shares, your surviving parent(s), in equal shares and lastly your estate.

SJ Coleman

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