Author Topic: Primary vs Secondary Beneficiary in 401k or IRA Plan  (Read 566 times)

kenmoremmm

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Primary vs Secondary Beneficiary in 401k or IRA Plan
« on: September 22, 2018, 12:08:30 AM »
I talked with my mom tonight regarding her finances. She said she has designated her primary beneficiaries with a 80/10/10 split and a secondary beneficiary of 100%. The question came up with what would happen if, say, two of the primary beneficiaries died simultaneously. Let's say 80 and 10 died. Would the remaining 10% beneficiary receive 100%, or would it be 10% to that beneficiary with the secondary beneficiary receiving 90%?

Likewise, if the secondary beneficiary was a dependent of the 80% primary, and the 80% guy died, would the secondary then get 80%, while the two primaries each got 10%?

ILikeDividends

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Re: Primary vs Secondary Beneficiary in 401k or IRA Plan
« Reply #1 on: September 22, 2018, 12:37:11 AM »
I talked with my mom tonight regarding her finances. She said she has designated her primary beneficiaries with a 80/10/10 split and a secondary beneficiary of 100%. The question came up with what would happen if, say, two of the primary beneficiaries died simultaneously. Let's say 80 and 10 died. Would the remaining 10% beneficiary receive 100%, or would it be 10% to that beneficiary with the secondary beneficiary receiving 90%?

Likewise, if the secondary beneficiary was a dependent of the 80% primary, and the 80% guy died, would the secondary then get 80%, while the two primaries each got 10%?
It really depends on the probate laws of your state.  My layman's interpretation of my own state's laws, any beneficiary's share who predeceases the testator (the one who wrote the will and subsequently died at a later date than the predeceased beneficiary died) or the settlor of a trust (also called a grantor or a donor) lapses back to the other living beneficiaries (living at the time the testator or settlor died) of the will or the trust, unless explicitly specified otherwise in the will or the trust.

I am not an attorney.  You really need to consult an estate attorney who is an expert in your own state's probate laws.  An executor of a will, or the trustee of a trust, is generally held personally liable for the proper and legal execution of either type of testament (will or trust); legally bound to act as a fiduciary in either case.

You will not find the answers you need in an internet forum.
« Last Edit: September 22, 2018, 01:14:24 AM by ILikeDividends »

terran

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Re: Primary vs Secondary Beneficiary in 401k or IRA Plan
« Reply #2 on: September 22, 2018, 07:34:57 AM »
According to https://www.newsobserver.com/news/business/personal-finance/article10119929.html (found via google search for "ira what happens if one primary beneficiary dies" if you want to look for other sources) if a primary beneficiary dies, their portion will be divided proportionally among the remaining primary beneficiary's, so only once all primary beneficiaries are dead will the secondary beneficiaries get anything

Note that (at least in my Fidelity IRA) you can make a "Per Stirpes" election on a per beneficiary basis to which "allows you to pass your assets down to your beneficiary’s children if he or she dies before you do." I don't know that much about this, but I think that's a simplification and it would actually pass to that person's heirs even if they don't have children -- I could be wrong though.