Choosing your Retirement Plan Beneficiary

The job of selecting a beneficiary for your 401k retirement plan can be a difficult one. The task is however a very important one.

It is very common that when a person is married, he or she would name the spouse as beneficiary on the proceeds. There are however cases, when someone other than the spouse, needs to be made beneficiary of the plan, and this is when complications start arising.

When a person is married, and he needs to name a beneficiary that is not the spouse, the first thing he needs to get is approval from his spouse in a written form. In some states, not even this written approval is allowed, and the person would have to seek the court’s permission before making this arrangement.

The type of account held, will also have a bearing. Apart from the provisions for the 401k retirement account, other provisions exist for IRAs. The IRA provisions for example state that if a person’s residency, is not a community property state, even if he is married, he can name anyone as beneficiary.

Other community states have a special form that needs to be filled in, so always have a look and check that you are within the required regulations.

When someone inherits an IRA account, he may just file a claim as beneficiary and the account will be automatically changed into his name. In the above case, one would obviously need to provide the deceased’s death certificate, and also proof of his own identity such as the required searches can be done.

This procedure would make the descendant, the new owner of the IRA. The new owner then has the right to name a new beneficiary, thus not having to pay any income tax if the whole sum of money is not used.

Other options are also available; however one must always bear in mind legal fees that they incur, and possible taxes. The best thing to do is to seek legal advice, and thus make the most appropriate decision.