Your 401(k) goes to whoever you named on the beneficiary designation form you filed with your plan, no matter what your will says. If you’re married, federal law layers one rule on top: your spouse is the automatic beneficiary unless they’ve signed a written waiver. Everything else — children, siblings, a trust, a charity, your estate — only inherits because the form says so, or because no valid form exists and the plan’s default rules kick in.
The Beneficiary Form Controls Everything
When you opened your 401(k), you filled out a beneficiary designation naming who should receive the balance when you die. That form is a contract between you and the plan, and it bypasses probate entirely. Your beneficiaries claim the funds directly from the plan administrator without waiting for a court to process your estate.
You can name primary beneficiaries (first in line) and contingent beneficiaries (backups who inherit if every primary beneficiary dies before you). You can split the account among multiple people or entities by percentage, as long as the shares total 100%. A common setup names a spouse as primary and children as contingents.
Updating the form is simple: contact your plan administrator or log into the plan’s website and submit a new designation. You’ll need each beneficiary’s date of birth and Social Security number. Reviewing the form after any major life change — marriage, divorce, a new child, the death of a named beneficiary — is the single most important estate-planning habit for retirement accounts, and the one people most often skip.
Your Spouse Has Automatic Rights Under Federal Law
The Employee Retirement Income Security Act gives surviving spouses powerful protection over 401(k) assets. Under ERISA, your spouse is automatically the default beneficiary. If you want to name anyone else, your spouse must consent in writing, and that consent must be witnessed by a plan representative or a notary public.1Office of the Law Revision Counsel. 29 USC 1055 – Requirement of Joint and Survivor Annuity and Preretirement Survivor Annuity The consent form must identify the specific alternate beneficiary or explicitly allow you to choose without further approval.
This protection covers most private-sector 401(k)s, 403(b)s, and traditional pensions. It does not cover IRAs, government plans, or church plans. A prenuptial agreement waiving 401(k) rights is not enough on its own, because ERISA requires the waiver to come from a “spouse” — so the consent must be signed after the marriage, using the plan’s own form.2U.S. Department of Labor. FAQs About Retirement Plans and ERISA Until that happens, ERISA’s default spousal rights remain in place regardless of what the form says.
A surviving spouse also has options no other beneficiary has. They can roll the account into their own IRA or 401(k) and treat it as their own retirement money, keep it as an inherited account with distributions based on their own life expectancy, or take a lump sum. The rollover option is unique to spouses; no other beneficiary can convert inherited 401(k) funds into their own retirement account.3Internal Revenue Service. Retirement Topics – Beneficiary
What Happens if No Beneficiary Is Named
If you die without a valid beneficiary designation on file, the plan document’s default rules take over. Most plans pay the account first to a surviving spouse, then to surviving children, and finally to the estate. Some skip children and go directly from spouse to estate. The exact order depends on how the plan was written.
When the money ends up with your estate, it enters probate. A court supervises distribution, which adds time, legal costs, and public disclosure. If you also died without a will, state intestacy laws decide who gets it. The bigger cost is often tax-related: beneficiaries who inherit through a named designation can spread distributions over a longer window, while assets passing through an estate typically must be distributed within five years, accelerating the tax bill.
Divorce Does Not Remove an Ex-Spouse Automatically
This is where people lose the most money through pure inertia. Many states have laws that automatically revoke a former spouse as beneficiary of financial accounts after divorce. Those laws do not apply to ERISA-governed 401(k) plans. In Egelhoff v. Egelhoff, the Supreme Court held that ERISA preempts state revocation statutes because federal law requires plan administrators to follow the plan documents, not state domestic relations law.4Legal Information Institute, Cornell Law School. Egelhoff v. Egelhoff, 532 U.S. 141 (2001)
The practical consequence: if you divorce and forget to update your 401(k) beneficiary designation, your former spouse inherits the account. Your current spouse, your children, and your will are all irrelevant. The plan administrator will pay whoever the form says. Divorce decrees and property settlement agreements don’t change the designation either, even when they explicitly state that a former spouse has no claim to the 401(k). The only fix is submitting a new beneficiary designation form to the plan administrator after the divorce is final.
Naming a Trust as Beneficiary
You can name a trust as your 401(k) beneficiary, and it makes sense in some situations: providing for minor children, protecting a beneficiary with a disability, or controlling how a spendthrift heir accesses the money. The trust document can specify exactly when and how distributions happen, which a direct beneficiary designation cannot do.
The tradeoff is complexity. Trusts reach the highest federal income tax bracket at a much lower income threshold than individuals do, so distributions that accumulate inside the trust get taxed heavily. The trust must also meet specific IRS requirements to qualify as a “see-through” trust, which allows the beneficiaries’ life expectancies to govern distributions rather than an accelerated timeline. Getting this wrong can force the entire account to be distributed within five years. Anyone considering this route needs an estate planning attorney who understands both trust law and retirement account distribution rules.
Minor Children as Beneficiaries
Naming a minor child directly as your 401(k) beneficiary creates a problem: minors cannot legally take control of financial accounts. When a child under 18 inherits, a court must appoint a guardian or conservator to manage the funds, which adds delay and legal cost. Once the child reaches the age of majority, they gain unrestricted access to whatever is left, which may not be what you intended for a teenager inheriting a six-figure account.
Two alternatives avoid this. The first is naming a trust for the child’s benefit as the beneficiary, giving a trustee control over distributions until whatever age you choose. The second is designating a custodian under the Uniform Transfers to Minors Act, which is simpler and cheaper than a trust but gives the child full control at 18 or 21, depending on the state. For large balances, the trust route generally offers better long-term protection.
Your Will Does Not Control Your 401(k)
A will has no power over 401(k) assets if a valid beneficiary designation exists. The form is a contract with the plan, and ERISA requires the plan administrator to follow it. Even if your will says “I leave my entire 401(k) to my daughter,” the plan will pay whoever is named on the designation. Courts have upheld this repeatedly, including in cases where the outcome was clearly not what the account holder intended.
The only scenario where a will matters is when no beneficiary designation exists and the plan’s default rules direct the assets to the estate. At that point, the will governs. But relying on this path means the assets go through probate, which is slower, more expensive, and eliminates some tax-advantaged distribution options available to named beneficiaries.3Internal Revenue Service. Retirement Topics – Beneficiary
What the Person Who Inherits Will Face
Choosing a beneficiary is partly a tax decision, so it helps to know what the recipient actually gets. Most non-spouse beneficiaries of someone who died in 2020 or later must empty the entire account by December 31 of the tenth year after death.3Internal Revenue Service. Retirement Topics – Beneficiary If the account holder had already started taking required minimum distributions before dying, the beneficiary must also take annual distributions during years one through nine of that window.5Federal Register. Required Minimum Distributions A narrow group — the surviving spouse, a minor child of the account holder, a disabled or chronically ill person, and anyone not more than 10 years younger than the account holder — can still stretch distributions over their own life expectancy.6Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements
Distributions from an inherited traditional 401(k) are taxed as ordinary income to the beneficiary. A $500,000 account doesn’t arrive as $500,000 in spending money; every dollar withdrawn is added to that year’s taxable income and can push the heir into a higher bracket. The 10-year deadline compresses that tax hit into a shorter window than the old life-expectancy stretch allowed. On the positive side, inherited 401(k) distributions are exempt from the 10% early withdrawal penalty that normally applies before age 59½, regardless of the beneficiary’s age.7Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
If you take one action after reading this, log in to your plan and look at the beneficiary designation on file. That form, and nothing else, decides who gets your 401(k).