Who should you name as the 401k beneficiaries of your pre-tax retirement accounts, and why?

You are working on your estate plan, filling out your estate planning documents, and trying to figure out who you should name as the beneficiary of your 401k account and IRAs. Simple – the kids, right? Not so fast. Who should be your 401k beneficiaries? Who should you name to inherit your IRAs? If you want to minimize taxes, who you name as your beneficiaries matters. This post, and the accompanying video, will help you understand non-spouse beneficiary distribution rules for inherited pre-tax IRAs and “regular” pre-tax 401ks.

Understanding the rules from an income tax standpoint might help you decide who to name as your beneficiary. Who inherits the assets you hold in your various retirement accounts could have a big impact on the amount of money that is ultimately received by your heirs vs given to Uncle Sam.

The beneficiary distribution rules for inherited pretax 401k accounts and IRAs when your spouse is not named as beneficiary are important for income tax and estate planning purposes.

The longer a beneficiary is able to wait before taking distributions from an inherited pretax account the longer the assets can grow without being taxed. Waiting longer to take a distribution allows the beneficiary to be more tactical about when to take distributions.

As a boutique wealth management firm, we have a legal fiduciary obligation to you, our client, and our fully independent financial advisors welcome helping you construct a customized, disciplined, and comprehensive financial, investment, and retirement plan.

Watch our YouTube on Reducing Taxes on Inheriting a Retirement Account for more information.