What Happens to Your 401(k) When You Die?

What happens to your 401(k) when you die? It goes to the beneficiary named on your account, not to whoever your will names. The plan administrator pays out according to the plan's records. After that, the person who inherits it has to follow federal withdrawal rules, and for most non-spouse beneficiaries those rules mean emptying the account within 10 years.

That's the short answer. The rest of this guide covers who actually gets the money, what a spouse can do that other heirs can't, how the 10-year rule works, what the first phone call looks like, how the account is taxed, what happens after a divorce, and what to do today so the account goes where you intend.

This guide is general information, not legal or tax advice. Plan rules and tax law change, so confirm the details with the plan administrator and a tax professional before acting.

The quick version

Who inherits	What they can generally do	Source
Surviving spouse (sole beneficiary)	Keep it as an inherited account or roll it into their own IRA. No 10-year deadline.	IRS
Minor child, disabled or chronically ill person, or someone not more than 10 years younger than the owner	Withdraw over their life expectancy (or the owner's remaining life expectancy, whichever is longer), or follow the 10-year rule if the owner died before required distributions began.	IRS
Anyone else who is an individual (adult child, friend, niece)	The 10-year rule: empty the account by the end of the 10th year after the death.	IRS
Not a person (for example, an estate)	The older pre-2020 rules apply, which can mean a shorter timeline.	IRS

Who gets your 401(k) when you die?

The IRS defines a beneficiary as generally any person or entity the account owner chooses to receive the benefits of a retirement account after they die. The owner must designate the beneficiary "under procedures established by the plan." In practice, that means a beneficiary form kept by the plan, not a paragraph in your will.

A 401(k) is a non-probate asset. It passes by beneficiary designation rather than through your will. Fidelity puts it this way: beneficiaries named in your plan inherit your 401(k) even if your will says someone else should receive it. When the plan administrator receives a claim, its job is to pay according to the plan documents.

The U.S. Supreme Court confirmed how seriously that duty is taken in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan (2009). The plan administrator had paid the benefits to the person named on the plan's records, and the Court held that it "did its statutory ERISA duty by paying the benefits to [her] in conformity with the plan documents," even though the beneficiary had signed away her rights in a divorce.

If no valid beneficiary is on file, the plan's own default rules apply. Those differ from plan to plan. Fidelity says that if you don't name a beneficiary, your 401(k) may become part of your estate and go through probate, depending on the plan, and that the same can happen if you name your estate. Read your plan's documents rather than guess. For the wider picture, see what happens when no beneficiary is named.

Primary and contingent beneficiaries

Fidelity explains that primary beneficiaries are first in line, and contingent beneficiaries are paid if the primary beneficiaries die before you. If you name several primary beneficiaries, you assign each a percentage, and the percentages must add up to 100%. Fidelity also describes a "per stirpes" choice, which sends a deceased beneficiary's share to their children instead of splitting it among your other beneficiaries. Whether your plan offers that option is a question for your plan administrator.

What a surviving spouse gets that other heirs don't

Spouses have special protections under federal law.

The U.S. Department of Labor explains that in most 401(k) plans and other defined contribution plans, if you die before you receive your benefits, they automatically go to your surviving spouse. If you want to name someone else, your spouse must consent by signing a waiver, and the signature must be witnessed by a notary or a plan representative.

That has two practical consequences:

• If you're married and want to name a child, a sibling or a trust as primary beneficiary, you generally need your spouse's signed consent. Without it, the designation may not hold.
• If you were single when you enrolled and later married, check your beneficiary form. The plan's spousal rules may now apply to you.

A spouse's options after your death

A surviving spouse who is the sole beneficiary has more choices than anyone else. According to the IRS, whether the spouse is the sole beneficiary is determined by September 30 of the year after the year of death. For an owner who died in 2020 or later, the IRS lists these options for a spouse:

• Keep it as an inherited account. The spouse can delay distributions until the year the owner would have reached the age when required distributions begin, take distributions over their own life expectancy, or follow the 10-year rule, depending on whether the owner had already reached their required beginning date.
• Roll it into their own IRA. The IRS lists this as an option for a spouse beneficiary.

Fidelity adds details that matter for planning:

• A spouse can take a lump sum, which is taxed as ordinary income (except qualified Roth amounts and after-tax contributions), and which can create a large tax bill in a single year.
• If the spouse rolls the money into their own account and is younger than 59½, withdrawals may trigger the 10% early withdrawal tax. Fidelity notes that inherited IRAs avoid that penalty, so the choice between "my own account" and "an inherited account" matters for a younger spouse who may need the money soon.
• Since 2024, a SECURE 2.0 provision lets a spouse elect to be treated as the deceased employee for required-distribution purposes. Fidelity says this can help an older surviving spouse wait longer before withdrawals begin.

The IRS's Publication 590-B also says that if a spouse takes the "treat it as my own" route for an inherited IRA, they can be treated as having made that choice simply by making contributions to the account or by not taking a required distribution. It's a good reason to get advice before the first withdrawal decision, not after.

The 10-year rule for everyone else

Before 2020, many beneficiaries could stretch withdrawals over their own life expectancy. The SECURE Act changed that for account owners who die after December 31, 2019.

According to the IRS, for defined contribution plans and IRAs, the entire balance generally must be distributed within ten years after the owner's death. The IRS lists the exceptions. They apply to:

• a surviving spouse,
• a child who has not reached the age of majority,
• a disabled or chronically ill person, and
• a person not more than ten years younger than the account owner.

Those beneficiaries are called "eligible designated beneficiaries." Everyone else who is an individual, such as an adult child, a friend or a niece, is a "designated beneficiary" subject to the 10-year rule.

Publication 590-B gives a simple example: if the owner died in 2025, the beneficiary would have to fully distribute the account by December 31, 2035.

What "10 years" really means

The IRS defines the 10-year rule as emptying the entire account by the end of the 10th year following the year of the owner's death. A few details:

• Timing within the 10 years depends on when the owner died. The IRS says a beneficiary's options depend on whether the owner died before or after their "required beginning date," which is the date they were required to start taking their own required minimum distributions. Fidelity says that if the owner died before that date, the beneficiary can decide how much, if any, to withdraw during the 10 years as long as the account is empty by the end. If the owner had already started required distributions, Fidelity says the beneficiary may have to take annual distributions during the 10 years, with the remainder out by the end of year 10. Ask the plan administrator or a tax professional which applies to you.
• Your plan may be stricter. Fidelity notes that plan rules may require the beneficiary to take the money out of the plan sooner than the IRS deadline.
• Missing a required withdrawal is expensive. The IRS says the amount not withdrawn may be subject to an excise tax of 25%, reduced to 10% if the shortfall is corrected within two years. The penalty can be waived if the shortfall was due to reasonable error and reasonable steps are being taken to fix it.
• The year of death. For the year the owner died, the IRS says the required amount is whatever the owner was required to withdraw and hadn't withdrawn before death. After that, the beneficiary's own rules apply.
• A minor child. Fidelity describes a combined path for a minor child of the owner: life-expectancy distributions until age 21, followed by a 10-year period ending by age 31. Check this with the plan, since it depends on the plan's rules.

Two more rules people miss

• Roth accounts aren't exempt from the timeline. The IRS notes that Roth owners need not take distributions during their lifetime, but beneficiaries of Roth IRAs and designated Roth 401(k) accounts are subject to the required distribution rules after the owner's death.
• A non-person beneficiary changes the rules. If the beneficiary is not an individual, such as an estate, the IRS says the SECURE Act changes don't apply, and the rules are applied as if the owner had died before 2020. In plain terms, naming "my estate" can lead to a worse outcome than naming a person.

What the first phone call looks like

If you've just lost someone and you think you're the beneficiary of a 401(k), here's the order of operations.

1. Find the plan administrator. Start with the deceased person's current or former employer, or look for statements from the plan's provider. The IRS says that when a participant dies, the surviving spouse should contact the employer or the plan's administrator to make a claim. In practice, any beneficiary starts in the same place.
2. Expect to provide a death certificate. The IRS says the plan will likely request one.
3. Wait for the plan's explanation of your options. According to the IRS, the plan will notify you of the amount and form of the benefits (a lump sum or installment payments), whether the payments can be rolled over into another retirement plan, and, if so, the method and time period for doing it.
4. Don't rush a lump sum. The IRS says beneficiaries of an IRA and most plans can take a lump sum at any time and must include any taxable distributions in their gross income. Fidelity warns that once a lump sum is taken, the 401(k) balance can't be rolled over.
5. If you want to keep the money in a retirement account, ask for a direct transfer. The IRS says a retirement plan distribution paid to you is subject to mandatory 20% withholding, even if you plan to roll it over later, while a direct rollover to another plan or IRA avoids that withholding. Ask the administrator how this works for a beneficiary.
6. If you're not the spouse, ask about an inherited IRA. Publication 590-B says a non-spouse who inherits an IRA can't treat it as their own, can't make contributions, and can't roll amounts into or out of it, but can make a trustee-to-trustee transfer to an IRA set up in the deceased owner's name for the beneficiary's benefit. Fidelity says non-spouse beneficiaries can transfer inherited 401(k) money directly into an inherited IRA, which has no early withdrawal penalty but still follows the 10-year rule.

Is the inherited money taxable?

Generally, yes, for traditional accounts. The IRS states that beneficiaries must include taxable distributions in their gross income. Most plans and IRAs let a beneficiary take a lump sum at any time, but a large lump sum can push a beneficiary into a higher tax bracket in a single year. This is the reason the timing of withdrawals within a 10-year window matters.

Roth accounts

Roth accounts follow different tax rules. According to the IRS, withdrawals of contributions from an inherited Roth are tax free, and most withdrawals of earnings are tax free too, although earnings withdrawals may be taxed if the Roth account is less than 5 years old at the time of withdrawal. Fidelity makes the same point, and says a Roth account's tax-free treatment for heirs depends on the account having been held, or the conversion having been made, at least five years earlier.

Income tax versus estate tax

These are two different taxes, and people often mix them up. Income tax applies to the beneficiary when they withdraw taxable money. Estate tax applies to the deceased person's estate before assets are passed on. The IRS says an estate tax return is required only if the gross estate, increased by adjusted taxable gifts and specific gift tax exemption, is valued at more than the filing threshold for the year of death, which is $15,000,000 for 2026. Most families will never reach it, but state rules can differ.

For estates that do owe estate tax, Publication 590-B says a beneficiary may be able to deduct the estate tax paid on any part of a retirement distribution that counts as "income with respect to a decedent." That's a question for a tax professional.

Can creditors take a 401(k) after you die?

Fidelity says creditors cannot go after your 401(k) when you die. Your executor settles debts out of your estate, but not out of your 401(k), unless you didn't name any beneficiaries. In that case, the 401(k) becomes part of your estate, which pays any outstanding bills.

Fidelity also notes that this protection isn't the same for every inherited retirement account. For a non-spouse beneficiary who transfers the money to an inherited IRA, Fidelity says there is no bankruptcy protection unless state law protects the account from creditors' claims. If this matters in your situation, speak with an attorney before taking any distribution.

What happens to your 401(k) after a divorce?

This is the situation that produces the worst outcomes, and the courts have been clear.

In Egelhoff v. Egelhoff (2001), a man named his wife as the beneficiary of a life insurance policy and a pension plan through his employer. They divorced, and he died without changing the forms. A Washington state law said a divorce automatically revoked a former spouse's designation. The U.S. Supreme Court held that ERISA preempted that state law, so the plan administrator had to follow the designation on file.

Combined with Kennedy, the message is consistent: for employer plans covered by ERISA, the beneficiary form on file is what counts. A divorce decree, a will, or what everyone assumed doesn't automatically change it.

Action step: after any divorce, separation or remarriage, update the beneficiary on every retirement account the same week.

The mistakes that cause the most trouble

• Never naming a beneficiary. The plan's default rules decide for you.
• Leaving an old beneficiary in place. See beneficiary designation mistakes for the full list.
• Naming a minor child directly. Fidelity notes that minors named as beneficiaries might not have access to the assets until they reach a certain age. Talk to an estate attorney about a trust or custodian.
• Naming your estate. As covered above, it can compress the payout timeline and send the account through probate.
• Forgetting old employer plans. An old 401(k) from a previous job can still have a beneficiary form from years ago. Check every account you ever had.
• Skipping the spouse's consent. If you're married and name someone else, the designation may not hold without the signed waiver.
• Not telling anyone the account exists. Your family can't claim something they don't know about. Learn more in how to find and recover lost assets after a loved one dies.

What to do this week

1. List every retirement account: current 401(k), old employers' plans, IRAs.
2. Log in and view the beneficiary on each one. Don't rely on memory.
3. Confirm primary and contingent beneficiaries are named and that the spelling and relationship are correct. Fidelity suggests having each beneficiary's date of birth and Social Security number ready for the form.
4. If you're married, confirm any non-spouse designation has the required spousal consent.
5. Write down where each account is held and who to call. Include the plan administrator's contact details and a copy of your beneficiary forms. Your family should be able to find this in minutes, not months.
6. Review after every major life event: marriage, divorce, birth, death, move. Fidelity recommends reviewing at least annually.

Keeping that list somewhere your family can reach is the part most people skip. Perpetual21 is built for it: you record each account, name the people who should be able to see it, and keep everything in one place. Take the free inheritance risk quiz to see where your gaps are.

For the wider picture, read the complete beneficiary designation guide and the complete guide to every asset you own and who gets it. If life insurance is part of the picture, see what happens to your life insurance when you die.

Frequently asked questions

Does my will control who gets my 401(k)? Generally no. A 401(k) passes by beneficiary designation, and the plan administrator pays according to the plan documents.

Does a 401(k) go through probate? Not when a beneficiary is named, according to Fidelity. If no beneficiary is named, or the estate is the beneficiary, it may become part of the estate and go through probate, depending on the plan.

Can my spouse be removed as beneficiary of my 401(k)? In most 401(k) plans, only with your spouse's written consent, witnessed by a notary or plan representative, according to the Department of Labor.

How long does a beneficiary have to take the money out? For most individual non-spouse beneficiaries of someone who died after 2019, the entire account must be distributed by the end of the 10th year after the death, per the IRS. Spouses and other eligible designated beneficiaries have more options.

What is the 5-year rule for inherited 401(k)s? The IRS describes it as emptying the account by the end of the 5th year after the owner's death, with no withdrawals required before then. It applies mainly to older cases and to non-person beneficiaries such as an estate when the owner died before required distributions began.

Can a spouse roll over an inherited 401(k)? Yes. The IRS lists rolling the account into the spouse's own IRA as an option for a spouse beneficiary.

Can a non-spouse roll over an inherited 401(k)? Fidelity says a non-spouse beneficiary can do a direct trustee-to-trustee transfer into an inherited IRA. The IRS says a non-spouse can't treat an inherited IRA as their own.

Do beneficiaries pay tax on an inherited 401(k)? Beneficiaries must include taxable distributions in their gross income, per the IRS. Qualified inherited Roth accounts have different rules.

What if I never named a beneficiary? The plan's default rules decide, and they vary. Check your plan documents and name one today.

What happens to a 401(k) if the owner dies before retirement? The same beneficiary and distribution rules apply. The IRS says benefits the participant would have been entitled to are usually paid to the designated beneficiary in the form the plan provides, either as a lump sum or an annuity.

Sources

• IRS, Retirement topics – Death
• IRS, Retirement topics – Beneficiary
• IRS, Retirement plans FAQs regarding required minimum distributions
• IRS, Rollovers of retirement plan and IRA distributions
• IRS, Estate tax
• IRS, Publication 590-B, Distributions from Individual Retirement Arrangements
• U.S. Department of Labor, What You Should Know About Your Retirement Plan
• Fidelity, What happens to your 401(k) when you die?
• Fidelity, Inherited 401(k): what to know if you're a 401(k) beneficiary
• U.S. Supreme Court, Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285 (2009)
• U.S. Supreme Court, Egelhoff v. Egelhoff, 532 U.S. 141 (2001)