"In general, if you name John as your beneficiary, and John dies before you (and you don't change the beneficiary before you die) then the asset would pass to John's estate (his heirs)."
Nope.
In the example, if John predeceases Tom, John is not designated per stirpes and James is left as the only remaining primary beneficiary, it all goes to James. If Tom want's Johns issue to be the beneficiary in the case where John predeceases him, Tom would designate John per stirpes. If Tom wants John's wife to get what would otherwise be John's share, a custom beneficiary designation would be needed stating such, if the 401(k) plan permits custom beneficiary designations.
