Does the Next of Kin Get the 401(k) When the Beneficiary Dies?

Does the Next of Kin Get the 401(k) When the Beneficiary Dies?
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If you put money away in a 401k for many years, you may accumulate a healthy nest egg by the time you reach retirement age. But, if you die before you can enjoy the money you've saved, the money passes on to the beneficiary or beneficiaries you choose. For some people, a 401k represents a significant portion of their assets at death. If your beneficiary or beneficiaries die before you do, the 401k becomes part of your estate and may or may not pass on to your next of kin.


  • Whether the next of kin receives the 401k when the beneficiary dies will depend on what the person's will specifies. If he dies with no will, then state law will determine who the next of kin is and how the estate is divided.

401k Beneficiaries

When you set up a 401k, part of the paperwork asks you to name a primary and a secondary or contingent beneficiary. The primary beneficiary inherits the money in the 401k if you die before you withdraw all the funds. If the primary beneficiary precedes you in death, then the secondary beneficiary inherits the money. Both the primary and secondary beneficiary would have to die before the money in the 401k could pass to anyone else. Or, if the primary beneficiary dies and you failed to name a contingent beneficiary, the 401k would become part of your estate and subject to probate.

Importance of a Will

If you die and leave a will that leaves the bulk of your estate to a person or people, the money in your 401k, as part of your estate, would pass to the beneficiary or beneficiaries in your will – provided both the primary and secondary beneficiaries you named when you established your 401k die before you do. The beneficiary named in your will may or may not be your next of kin, depending on your will. You can leave your estate to a friend, neighbor, relative or to a charitable foundation.

Dying Without a Will

Someone who dies without a will dies intestate. If you die intestate, the probate court determines the closest relative, or next of kin. State law determines the order of kinship and how the estate will be divided. For example, Connecticut law dictates that if a person dies without a will, the spouse is entitled to a portion of the estate and any children of the deceased divide the remainder of the estate equally. The 401k becomes part of the estate, to be divided according to law, only if the primary and secondary beneficiaries named by the deceased in the 401k paperwork are also deceased.

Income Tax Implications

While other money you inherit from an estate is usually tax-free, if you inherit a 401k, you'll owe income tax on the money you receive from the fund. The money was deposited before taxes, so the IRS expects to receive taxes due. You'll report the money as a 401k distribution on your income tax return.