It is true that only the spouse can easily make it a non-taxable affair. But I remember talking about this with one of my 401K plan managers. What I vaguely recall is that it depends on the 401K plan sponsor and sometimes the company the deceased was working/worked for. Some plans allow non-spouse inheritors of 401K to leave the money in the plan. The rules for the RMD (required minimum distribution) and the RBD (required beginning date) of the RMD's vary based on when the owner dies. I have simply written "Can leave untouched till even 3 months. Then get expert advice" in the spreadsheet instructions for the bachchas. : ) ===== OP, thank you for starting this thread!
Ammaa takes care from the beyond. Yes, you are right. IRS rules are intentionally left fuzzy so that employers (and their hired fiduciary companies) can decide how they balance the cost (of administering the program) with the benefits of goodwill from the employed, the market spheres they operate in & potential recruits. Many 401K schemes require the survivors to contact them as soon as feasible. And then some offer a set number of months (from either the DofDeath, or the DofReceiving the death certificate of the employee/retiree) to decide on how to receive the distributions (lump sum, limited number of installments over a small number of tax years, or roll over option). Since large corporations copy one another's HR schemes, the options would be pretty similar. Spouses usually get the roll-over option, while others do not. As you had pointed out, it varies. But children (with worksheets) best be aware of this, and any changes to "policies" that companies seem to do ad nauseam. In the weeks and months of bereavement, many beneficiaries forget to inform (or dont know they should inform) the various places where the dearly decedent may have money stashes. This is often where the complications come. Affectionate marriages where the couple can talk to each other about all things, do help a lot in keeping inheritances easy to access to the heirs. A parent with a worksheet for bachchas is in a happy home. May you live long and spend down those entries of the worksheet to zero in collaboration with your loving man.
But its not fair right.. .the money was long before I got married and put into 401K long before I got married .. How can parents be denied that?
Don't mean to vent here but my spouse is the kind where he will put his parents first before me.. But for me whatever I have earned before (and should fairly go to my parents)and after marriage is is also going to him.. Frustrating .. .
The goal of 401K is to provide a way to save for one's own retirement, not that of one's parents. These factors make it attractive: employee contributes pretax money, most employers match some %age of employee contribution, no tax on the investment earnings until withdrawals starts. Why or how can parents be denied that money? The aim of the plan is to provide for the contributor's retirement or that of his/her spouse. It is fair enough. It is up to the individual to contribute money to the 401K that he/she knows will not be easily available till retirement. Money earned by a person and investment earnings made using that money belong to that person. The rules regarding beneficiary designation, who gets it if no beneficiary, etc. are quite straight-forward. There are cases where the rules might seem unfair - such as your case where you want your parents to get the money. But there are ways to work with the rules -- invest money elsewhere if you want to give it to parents after some years. If you were not aware of the 401K rules when you contributed it, that is a different matter. Unsolicited advice: if the husband is the kind who will not put his spouse first, who will not be too bothered about providing for his wife, then it is even more prudent to leave such a 401K untouched.
You pointed to the possibility that your husband may have done just like what you had done with your 401K. He has put his mummy as the beneficiary, and never bothered to change it after marriage, because he is the kind. I know one acquaintance who had done this (his mummy as beneficiary on 401K), and when his wife asked him about it, they had a big row. His mummy was living with them too. That MIL felt exactly the same way as you do [unfair... to deprive a mother who had suffered the pain to give birth ..and so forth], and without understanding the nuances of 401K, escalated the row into a big fight. Son [because he is the kind ] stood by his ma in this fight, and eventually they went to their own corners, and decided to let things be. Long eventually after, when the woman's younger child reached 18, they separated and got divorced. That unsolicited advice "leaving the 401K untouched" worked out fine in their cases. Because they were unmarried, their beneficiary designations on 401K became legitimate once again.
Wait... just as OP is not very pleased with the rule that the spouse remains the main or legal beneficiary of a 401K, the husband might also not be able to actually retain his mummy as the beneficiary in his 401K?
Having a non-spouse as the beneficiary without a written waiver agreement from the spouse will lead to delays in getting at the money if the owner of 401K is no more.
I think whatever you had before marriage is yours. https://www.avvo.com/legal-answers/...=Any funds in a 401k,to equitable division in...
