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Designating a Beneficiary for Your 401(k)

Estate Planning Blog - JLFranklin Wealth Planning

If you are married, your spouse should generally be listed as your beneficiary on your 401(k), 403(b), or other retirement account, including IRAs. If you do not list your spouse as beneficiary, the entire balance in the account will go through your estate at your death, and will have to be distributed within just a few years. Your spouse will get the money, but he or she will have to pay tax on the entire balance in the account at the time of distribution.

A much better scenario is to designate your spouse as your beneficiary on the retirement savings account. At your death, distribution payments can be made from your account based on your spouse’s life expectancy if he or she is over age 59 1/2, or if they are younger, the distributions can be postponed, instead of paid out all at once. Your spouse will only pay tax on the amount of money that he or she receives. Keeping the assets in a tax-deferred account means more growth and he or she will ultimately have more money to spend. Remember to also designate a contingent beneficiary, who will inherit the retirement account if your primary beneficiary predeceases you.

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The BE WISE Planning Strategy
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