If you opted to set up a retirement account (i.e. a 401(k) retirement plan) through your employer so that one day, you can discontinue working and retire, you should have been prompted to select a beneficiary, or a person you assign to receive benefits in the event of your passing. While most invest in their 401(k) with their retirement in mind, unexpected events sometimes occur which results in an account holder passing away. In the event a person dies and leaves money behind in a 401(k) retirement account, that money would be disbursed to the person they assigned as their beneficiary.
If the individual was married at the time of their death, their spouse would likely receive the money as federal law requires that a spouse be named as a beneficiary on a 401(k) account. In the event a spouse signed a waiver acknowledging someone else as the beneficiary (i.e. an adult child), then that person would inherit the funds.
But what if someone else was named as the beneficiary in their will?
In the event an individual names someone other than the individual listed as the beneficiary of their 401(k) account in their will, the beneficiary assigned to the 401(k) would receive the benefits. Why? Well, beneficiary designations actually supersede a will. This is why Coral Springs, FL estate planning attorneys encourage individuals to update their beneficiary after major life events occur such as divorce or death.
What happens to my 401(k) retirement savings if my beneficiary is no longer alive and I pass away?
Aside from naming a primary beneficiary for your 401(k) account, you also should consider naming a contingent beneficiary. A contingent beneficiary is a person you name to receive a payout from your retirement account in the event the primary beneficiary you named is deceased or cannot be located. Now, if you neglect to name a contingent beneficiary and the primary beneficiary is deceased, your 401(k) savings would then go to your estate. After a person dies, their estate must be settled, meaning assets will need to be distributed and/or used to satisfy certain debts.
When was the last time you reviewed your estate plan, will, or beneficiary designations?
If it’s been a few years since you have reviewed your estate plan or updated your beneficiary on your retirement plan, now would be a good time to contact the FL estate planning lawyers at Express Law. Because we don’t know what tomorrow might bring, it is always a good idea for an individual to have all the legal documents included in their estate plan up to date. If your estate plan needs updating or it is missing a document, Express Law is available to help get your estate plan in order.
Express Law can be reached at:
2900 West Sample Road
Pompano Beach, FL 33073