Custodian Policy or IRS Mandate?
I’d like to name different beneficiaries for my pretax vs my Roth balances in my 401(k). My custodians front line says it can’t be done, but doens’t know if it is just software weakness on their part or, if IRS prohibits. Does anyone know for sure?
Effectively I’d like pretax portions to go to charity and the Roth portion to my kids. Doesn’t sound like something the IRS would prohibit, but you never know. I figure if it is ok with the IRS, I can probably send a officially documented LOI, and talk my custodian into accepting it. Maybe not, but would like to try.
Permalink Submitted by mk foss on Fri, 2014-08-29 20:49
I believe the IRS regulations do not address this issue. The funds in a Roth 401k are a separate balance that’s administered as part of the regular 401k plan. There is no physical separation, just a bookkeeping entry. Because it isn’t a separate plan, there wouldn’t be a mechanism to have separate beneficiary designations. Perhaps if you named a trust as a beneficiary, the trust agreement could direct the trustee to transfer the Roth portion to a separate trust for the kids and the balance to charity. This may be a good subject for an new article from Bruce Steiner.