Who Inherits Your 401(k)? What You Need to Know About Beneficiaries

Your 401(k) plan is one of the most valuable assets you’ll build during your career at American Express. Yet one of the simplest and most often overlooked steps in protecting it is making sure your beneficiary designations are up to date.

Unlike your will, your 401(k)-beneficiary form directly determines who inherits your account. That means even the most carefully drafted estate plan can be overridden by an outdated form on file. Here are a few key things to keep in mind:

1. Know Who’s First in Line

Your primary beneficiary is the first to receive your account when you pass away. A contingent beneficiary is next in line if your primary beneficiary has also passed. Be sure both levels are clearly listed.

2. Understand Spousal Rights

If you’re married, federal law requires your spouse to be the primary beneficiary—unless they provide written, notarized consent for you to name someone else. This safeguard protects spouses, but it also means you’ll want to revisit your designations if your family situation changes.

3. Consider the Tax Angle

Who you name affects how taxes play out:

• Spouses can roll over the 401(k) to their own IRA and keep tax-deferred growth.

• Non-spouse beneficiaries (like children or siblings) generally must withdraw the full balance within ten years under current law.

• Trusts or estates can work in certain situations, but they often face higher tax rates and fewer distribution options.

4. Planning for Children

If your children are minors, your 401(k) can’t pay benefits directly to them. You might want to name a trust or create a custodial account as part of your estate plan to make sure the funds are handled according to your wishes.

5. Keep It Current

Life changes - marriage, divorce, new children, or loss of a loved one - should all trigger a review of your beneficiary designations. Outdated forms are one of the most common reasons inheritances don’t go where people intended.

6. Coordinate with the Rest of Your Plan

Make sure your 401(k) designations align with your will, trust, and insurance policies. Consistency helps avoid confusion and ensures that your full financial picture works together smoothly.

7. A Simple Next Step

Take five minutes today to log in to your 401(k) account and confirm your beneficiary information. It’s one of the easiest ways to protect your family and make sure your savings stay true to your intentions.

If you have more questions about how beneficiary designations fit into your overall estate plan or do not have any an estate plan and want to learn more, please contact me here!