Who is considered a non-spouse beneficiary?

The situation that my friend has experienced with inheriting his brother’s 401(k) plan is referred as a “non-spouse beneficiary”. This is a term that the IRS uses to describe a retirement plan, such as an IRA or a 401(k) that is ultimately inherited by someone other than the decedent’s spouse.

What is a non spousal IRA?

Non-spouse beneficiaries may not treat an inherited IRA as their own. That is, they may not make additional contributions to the account, nor can they transfer funds into an existing IRA account they have in their own names. Non-spouses may not leave assets in the original IRA.

Is a child a non-spouse beneficiary?

If you are married and you want to designate beneficiaries—such as children—other than your spouse, you may need written consent from your spouse. Otherwise, such plans follow roughly the same guidelines for what is taxable, but other features will vary from plan to plan.

Can a non-spouse be beneficiary of an IRA?

A non-spouse beneficiary can create an “inherited IRA” for the money in an IRA or qualified plan. The beneficiary can’t contribute to the account, which stays in the name of the deceased person, but the inherited funds can continue to grow tax-deferred.

What does non spousal mean?

‘Non-spouse’ means any heir who was not married to the deceased owner of the retirement account. It’s a category that includes blood relatives, friends, and even inanimate beneficiaries like trusts and charitable organizations. (Additional rules apply to non-spouses who aren’t also human beings, however.)

Can I name someone other than my spouse as beneficiary?

In most cases, the account holder can name a beneficiary, whether that’s a child, another relative, or someone else other than their spouse. In community property states, though, a spouse can inherit an IRA or must approve of the account holder’s designated beneficiary in writing.

Who gets 401K after death?

When you die, your 401(k) goes to whoever you have designated as a beneficiary or in your Will. Without a beneficiary, your 401(k) will go into your estate and ultimately through probate. Deciding what will happen to your money when you die isn’t an enjoyable process.

What happens to a retirement account when the owner dies?

When the owner of a retirement account dies, the account can be bequeathed to a beneficiary. A beneficiary can be any person or entity that the owner has chosen to receive the funds. If no beneficiary is designated beforehand, the estate will generally become the recipient of the account.

Does your spouse automatically become your beneficiary?

The Spouse Is the Automatic Beneficiary for Married People A federal law, the Employee Retirement Income Security Act (ERISA), governs most pensions and retirement accounts.

Can my child inherit my 401k?

You must name a primary beneficiary and at least one contingent beneficiary (to whom assets will pass if the primary beneficiary has already died). Beneficiary designations for 401(k)s override the contents of a will. Children who are still minors cannot inherit as direct beneficiaries.