If you want to leave your 401(k) to charity upon your death, a few simple strokes of a pen are all it will take. As the owner of the account, you have the right to direct who will receive your 401(k) assets. For estate planning purposes, leaving your 401(k) to charity might be not only easy but also smart. Your 401(k) assets are taxable if they pass to your estate or to your heirs, but if you designate a charity as your beneficiary, those assets pass tax-free. Making a charity your 401(k) beneficiary allows you to donate more of your assets.
Contact your firm's human resources department for the proper beneficiary forms. A 401(k) is a company-sponsored retirement plan, so your company's human resources department should have the forms you need to designate your beneficiary. If you have your own self-employed 401(k) plan, the firm that has custody of your plan assets should have beneficiary designation forms.
Get the consent of your spouse in writing. Federal law prohibits you from naming anyone but your spouse as the primary beneficiary of your 401(k). Failure to obtain this written permission could block your intentions to leave your 401(k) to a charity. However, if your spouse signs a waiver, you can designate anyone you like as your 401(k) beneficiary.
Clearly define the name of the charity on your beneficiary designation forms. While passing your 401(k) assets to a charity is a straightforward process, if you don't use the correct name of your charity, your transfer may not go as planned. For example, if you list "Cancer Society" as your beneficiary instead of "The American Cancer Society," your firm's human resources department may not know which cancer society you mean. In the case of any ambiguity, your 401(k) assets will be distributed to your estate.
Specify whether the charity is to receive all of your 401(k) assets or a certain percentage. Beneficiary designation forms allow you to apportion your 401(k) assets among different beneficiaries, if you so desire.
Include a reference in your will or trust documents. While a beneficiary designation takes precedence over any other estate documents, referring to your choice of 401(k) beneficiary in your will or trust can eliminate any chance of misinterpretation regarding your intentions for your 401(k) assets.
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- Fidelity Investments: Beneficiaries -- Fidelity Retirement Plan
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- AXA-Equitable: Choosing a Beneficiary for Your IRA or 401(k)
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