What Happens if No Beneficiary is Named on a 401k

If a 401(k) participant passes away without naming a beneficiary, the plan’s default distribution rules will determine who inherits the account balance. Typically, the spouse is the primary beneficiary, followed by children, parents, and siblings. If there is no living spouse or eligible family member, the plan may distribute the balance to the participant’s estate, which could result in additional taxes and probate fees. To ensure the desired distribution of 401(k) assets, it is crucial to designate beneficiaries promptly.

What Happens if There’s No 401(k) Beneficiary?

When you have a 401(k) plan, naming a beneficiary is crucial. If you pass away without designating a beneficiary, the distribution of your 401(k) assets will be determined by the plan document and/or state law.

Intestate Succession Laws

If there’s no named beneficiary, the distribution will follow intestate succession laws, which vary by state. These laws determine the distribution of assets to your legal heirs, typically in the following order:

Surviving spouse
Children
Parents
Siblings
Other relatives

The distribution percentages and rules can differ depending on your marital status and the presence of any dependents.

Example

Consider a deceased individual named John with no named 401(k) beneficiary. John was married to Mary and had two children, Sarah and Michael. Under the intestate succession laws of John’s state, the distribution would be as follows:

Recipient	Percentage
Mary (spouse)	50%
Sarah (child)	25%
Michael (child)	25%

In this example, John’s 401(k) assets would be divided equally between his spouse and children.

Plan Administrator Default Rules

If no beneficiary is named on a 401(k) plan, the plan administrator will follow a set of default rules to determine who inherits the account. These rules vary from plan to plan, but they typically follow a specific order of precedence, such as:

Surviving spouse
Children
Parents
Siblings
Estate

For example, if the deceased participant was married, the surviving spouse would typically inherit the 401(k) account. If there was no surviving spouse, the children would inherit the account. If there were no children, the parents would inherit the account, and so on. If no living relatives are found, the account balance will be forfeited to the plan and distributed to other plan participants.

It’s important to note that these default rules can be overridden by a valid beneficiary designation. If the participant named a beneficiary on their 401(k) plan, that beneficiary will inherit the account regardless of the plan’s default rules.

The following table summarizes the default beneficiary rules for 401(k) plans:

Beneficiary	Priority
Surviving spouse	1
Children	2
Parents	3
Siblings	4
Estate	5