How to Change Your 401(k) Beneficiary

When you sign up for your company 401(k) plan you are asked to name a beneficiary. Iif you get married, divorced, remarried, have children or a beneficiary dies, it could be time to make a change.

Instructions

Difficulty: Moderate

Things You’ll Need:

• A 401(k) beneficiary form
• A tax attorney or financial planner

1. Complete a new form after a major life event such as those listed in the introduction. If you can’t remember when you last completed a form or who the beneficiary is, complete a new one.
2. Request a new form from your employer. You should be able to do this on-line if your plan has Web access. Look for the forms section on the Web site.
3. Follow the instructions to complete the new form. If you are married, even if you are separated, your spouse is automatically your beneficiary according to federal law, unless they sign a waiver. The waiver may be on the same form or a separate form. Check to see if the waiver has to be notarized before it can be accepted.
4. Before designating a child as a beneficiary make sure that your plan will make a distribution to minors.
5. When you designate more than one beneficiary make it clear how the funds will be split; who gets what percentage or whether one beneficiary is primary and others contingent. A contingent beneficiary will receive the funds in the event that the primary beneficiary is dead when the distribution is made.
6. Make a copy of the new beneficiary form and keep it with your 401(k) paperwork. There is no reason to keep copies of previous beneficiary forms.

Tips & Warnings

• If you don’t remember who you designated request a copy of the form. It’s probably easier to just fill out a new form. A new beneficiary designation always supersedes an old one.
• Designating a domestic partner as a beneficiary can help formalize the relationship. It can often be used as one form of acceptable proof when evidence is required.
• If you have children from a previous marriage and you remarry, your new spouse will automatically be your beneficiary, even if your form on file has your children listed. If you want your children to be the beneficiary you will need a waiver and signature from your new spouse.
• If you are separated from your spouse but not divorced she is still automatically your beneficiary unless they sign a waiver, according to federal law. A form that says your children are beneficiaries is worthless unless your spouse signs the waiver.
• Consult a tax advisor if you want to set up a trust or designate funds to a charity. There are lots of complicated rules in these situations and you don’t want the money tied up in proceedings.