Wills in Indiana and around the country do not specify how retirement accounts, such as the 401(k) are managed after someone dies. When someone sets up their account, they are directed to complete a beneficiary form. This form should be regularly updated to ensure that the funds in that account go to the right person.
Spouse as beneficiary
For many people, the obvious choice is to name their spouse as the beneficiary. If you do not choose to leave them at least 50% of your 401(k), then you will need to have them sign a special form.
Minor children as beneficiary
Some people who do not have a spouse or the spouse receives enough through other estate funds choose to make their 401(k) beneficiary. Be aware that if children are not 18, they cannot directly control the money left to them.
Trust account as beneficiary
You can also choose to set up a trust account where the 401(k) administrator will send the money at the time of your death. This allows you to divide your 401(k) funds in any way you want. Furthermore, you can set up trusts to hold your distribution until a child reaches 18 or create to take care of family members with special needs.
Your estate as beneficiary
Others choose to name their estate as the beneficiary. Then, the funds go to the probate court, and your trustee distributes the funds. This may drastically slow down the process of people and charities receiving the funds that you want to give them.
It is vital to make wise decisions and update them as needed so that the 401k administrator knows how you want the funds distributed at the time of your death.