Another IRA Beneficiary Question

Submitted by John Boyle on Tue, 2023-08-01 15:13

A person has a 401k with three primary beneficiaries (no contingents, and no “per stripes” designation) divided equally. One of the beneficiaries dies, and prior to making any beneficiary changes, the owner of the accounts dies (about a month later). Now with only two living beneficiaries, do the balance get split 50/50 (to the remaining beneficiaries), or do the funds intended for the deceased beneficiary go to the estate of the beneficiary? The executor says the original intention was to have funds flow to the children of any deceased beneficiary, but I’m not sure how to make this happen. Thoughts?



Submitted by David Mertz on Tue, 2023-08-01 15:51

  • Unless the 401(k) agreement says otherwise, which would be quite unusual, the two remaining beneficiaries each receive 50% and nothing goes to the estate of the deceased beneficiary.
  • Without the per-stirpes designation, there is no way for the children to be beneficiaries.  If the two remaining beneficiaries are so inclined, they could make gifts to the children of the deceased beneficiary, but the two remaining beneficiaries are still responsible for the tax liability on any distributions that they might receive to fund the gifts.
  • With no part of the 401(k) passing to any estate, no estate executor has any control over the disposition of the 401(k).

Submitted by Alan - IRA critic on Tue, 2023-08-01 15:51

The 401k plan provisions determine where the deceased beneficiary’s share goes. Applying it ratably to the living beneficiaries is likely, but not the only possible plan default beneficiary provision. Intention of the plan owner is irrelevant at this point, but the beneficiaries need to seek a clear explanation from the plan administrator regarding the disposition of the deceased beneficiary’s share. 

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