basically, you have 3 choices
1) name a person as the beneficiary of your plan and if you want, multiple contingents beneficiaries. some plans may only allow one. but if multiple ones are allowed you can specify the order. read the beneficiary form carefully so you know who will get what. if you are not careful you may specify each of the contingent beneficiaries to receive equal shares rather than one after the other
2) don't name anyone then it goes to probate to decide who gets it and your estate may get a sizable bill for the tax on the value of the account plus incur probate costs
3) name a trust as beneficiary, then the trust specifies that any RMD's or other monies taken out of the retirement a/c are to be distributed to the named beneficiaries in the named amounts. even in a trust, a person must be the ultimate beneficiary
from my previous post.
You must leave your money to a person: The IRS has rules about trust beneficiaries. For instance, the 401(k) must go to a person or group of people. You can’t, for instance, leave your assets to a charity, your church, or any other non-specific entity. You may also need to designate a contingent secondary beneficiary who will receive the remaining assets should the primary beneficiary die before all funds have been distributed.
Trust setups require a bit of paperwork: Valid trust beneficiaries must qualify under state laws. They must be named specifically in the trust document, and a copy of this document must be filed with the 401(k) plan administrator. Under IRS rules, a will cannot override a beneficiary designation form, so you will want to be sure of your wishes.
so what happens if all the primary and contingent beneficiaries die? then if the trust doesn't handle this situation it ends up in probate. that's why you a competent person to set up the trust properly. Maybe this can be done by the Trust administrator or you may need a lawyer.
if you're still working you may want to discuss thongs with the human resource department or even the administrator of the plan.
