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All About Self Directed IRA and Solo 401K Beneficiary Forms

The IRA Financial Group is recognized as the leading facilitator of self directed IRA and Solo 401K Plans. As a result, we have encountered many scenarios involving issues pertaining the Self Directed IRA and Solo 401K Plan Beneficiary Forms.

One of our clients, (who we will call John Jones) worked at a privately owned construction company in a southern state for 22 years. The tradesman turned supervisor named Janet Jones, his wife of 38 years, the beneficiary of his 401(k) account in the event he died before her.

As fate would have it, Janet died first, so John updated his account paperwork, naming their three adult children the beneficiaries of the 401(k).

Eventually he got remarried, to Betty Murphy, and was on the verge of retiring. Six weeks later, at the age of 67, he died.

When Mr. Jones’s children from his first marriage tried to claim the assets, reasoning they were the ones named on the most recent beneficiary form, they were rebuffed by 401(k) administrator, who then ended up asking a court to determine the rightful owner of the money.

Under the terms of the company’s 401(k) plan, if an employee dies, the employee’s spouse has the right to the account assets, unless the spouse waives that right in writing. (That priority for spouses springs from federal law.) Betty Murphy Jones had never signed such a waiver.

The new Mrs. Jones filed a motion for summary judgment, and the matter eventually ended up in federal district court in, which this year awarded the approximately $250,000 in the account to her, disinheriting the children.

“I think John would be shocked,” said the lawyer representing the children, who are appealing. “It is a trap, an absolute trap” for an individual such as Mr. Jones, he says. Neither the plan administrator nor Betty Murphy Jones would comment.

Here are some key rules governing retirement accounts, and lessons from the tax attorneys at IRA Financial Group on how to navigate them as families grow and change:

Spouse Gets Priority

Rule No. 1: With 401(k)s, your spouse is the presumed beneficiary of your account upon your death—regardless of who is listed on the beneficiary form—unless he or she previously consented to your naming someone else beneficiary. These plans are governed by the federal Employee Retirement Income Security Act, or ERISA. Under this law, plans can provide for those spousal rights to kick in immediately, or no later than a year after the marriage. This general rule cannot easily be circumvented with a prenuptial agreement. Only a spouse can waive the right to 401(k)-plan assets—those who are engaged cannot.

If you are contemplating remarrying and are concerned about providing for children from a prior marriage, consider rolling your 401(k) to an IRA, where you have more latitude to name beneficiaries of your choosing, says Mr. Bergman.

Rule No. 2: If you are single when you die, your 401(k) assets pass to the person designated on your beneficiary form—regardless of what your will says or what other agreements you made before your death.

The tax attorneys at IRA Financial Group advise their clients on these issues and is a principal component in why clients choose to have the attorneys at this premier provider of self directed IRA And Solo 401(k) products at their side protecting their interests.

IRA Financial Group will take care of setting up your entire IRS compliant Self-Directed IRA or Solo 401K Plan. The whole process can be handled by phone, email, fax, or mail and typically takes between 7-21 days to complete, the timing largely depending on the state of formation and the custodian holding your retirement funds. Our tax and ERISA attorneys are on site greatly reducing the set-up time and cost. Most importantly, each client of the IRA Financial Group is assigned a tax attorney to help with the establishment of the Solo 401k Plan. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

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Posted in Self-Directed IRA, Solo 401(k)

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