401k with children from prior marriage and current spouse as beneficiaries

Submitted by Stephen Hodson on Sun, 2017-11-05 14:27

This male client, 68 years old, has a 401k balance of 1,000,000 +. His current beneficiary arrangement: 20% to each of his 2 daughters from a previous marriage and 60% to his current wife.

He is not working for the 401k employer. He does some consulting work and I suggested he open a SEP for that income. I thought it would be a good idea to split the 401k into 2 IRAs – one for the daughters and one for the current spouse. Anything else we should consider?



Submitted by Alan - IRA critic on Sun, 2017-11-05 19:34

  • He could partition the IRA into two accounts. It might simplify things after his death if the 3 of them would not act effectively in establishing separate accounts. And before his death, if his spouse is more than 10 years younger his RMDs would be reduced for the IRA with the spouse as beneficiary. He should also check into any NUA potential at the time he distributes the 401k.
  • A solo K may allow him larger contributions than a SEP IRA.

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