Federal and state laws can impact how beneficiaries receive their inheritance. For example, if a minor child is chosen as the primary beneficiary, it may not be as simple as “the money stays in the plan and the child grows up to use it in a tax-advantaged manner.” It is always best to seek legal counsel when selecting a beneficiary. Remember that the courts generally hold the 401k plan beneficiary election as the valid election over a separately established will, trust, or estate. Make sure elections are clear and in the approved format of the plan sponsor.

It may even make sense, depending on the participant’s situation, for participants to consult legal counsel. MVP can help shed light on the situation; give us a call!