What happens if I pass away without changing my 401K Beneficiary?
  • Liz Becerra, Financial GPS Data Analyst

What happens if I pass away without changing my 401K Beneficiary?


And we're back and today we're going to talk about 401K beneficiaries. So, when completing paper work for a 401K, many people focus on 2 of the 3 questions asked on a 401K Form.

1.) How much do you want to contribute to your plan, whether it's before-tax or after-tax deductions?

2.) What are your investment choices?

The last part is where you list your plan beneficiaries. People tend to make changes to the first 2 sections but quickly forget about the beneficiary section. Now when dealing with a 401K, it is considered a Transfer-Upon-Death Asset also known as a TOD asset. The biggest advantage to TOD assets is that they are generally allowed to pass to the surviving beneficiary outside the probate estate. This enables the designated beneficiaries to avoid the time and expense of the probate process for those assets.

The downside to a TOD account is that if the deceased's wishes for those assets have changed, but the beneficiaries have not been updated, there is not much survivors can do. Also, if the designated beneficiary passes away before the account owner but the beneficiaries were never updated, then those assets will be subject to the time and expense of probate.

That's why it is super important for you to always make sure that you update your 401K beneficiaries. You don't have to check it every single year, but just make sure that every few years you're up to date with what's going on and if there's a big life change that happens, it's always good to go back and update those things.

And that's it! That's why it's important to check your 401K beneficiaries and make sure that they are up to date.

Check out our blog on https://www.financialgps.co/single-post/401K-Spouse-Rollover-Options-for-Deceased-Spouse for more information.

Make sure to follow us on Instagram @Financial_GPS and subscribe to our YouTube Channel.

#taxes #savemoney #1040ES

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