Beneficiary wants to split benefit with an alternate non-named beneficiary

[CLE401kGuy]

Deceased participant named 1 beneficiary for his 401k account balance.

The beneficiary wishes to have the account balance split evenly with another individual (her niece) who is not named as a beneficiary

Is this permissible?

Both distributions will be to IRA's so there will be no tax implications

My thought is that if the beneficiary is signing off on the instructions for distribution, she can divide the distribution as she chooses....

Thanks in advance.

[Lou S.]

I am not aware of any legal authority that would allow the plan to pay anyone other than the named beneficiary.

[jpod]

And whether or not the plan would allow it won't work for tax purposes.

[Belgarath]

Ignoring the tax aspects, I do believe it is possible for a beneficiary to do a legal and valid "disclaimer" - but this is most definitely something I would check with an attorney licensed in your jurisdiction. I seem to recall there were some pretty rigid requirements for timing, etc...

[jpod]

The only effect of a disclaimer would be that the default beneficiary as determined by the plan document would become the beneficiary, so I doubt this would accomplish anything.

[Belgarath]

Good point! I was wandering in the murk, and somehow thinking that the niece was a secondary beneficiary, but when I go back and tread the post, that doesn't follow.

[Mike Preston]

But it doesn't not follow either.

[jpod]

As usual Mike Preston is correct. I suppose it's possible that the beneficiary is the decedant's sister and her niece is the decedant's daughter, in which case maybe she would be the default beneficiary, either directly or as sole heir to the estate. Not likely in my estimation, but certainly possible.

[MoJo]

The problem with this scenario is that there are ONLY two ways this can be accomplished: First, the bene can "disclaim" IF DONE PROPERLY, and IF THE NIECE IS NEXT IN LINE UNDER THE PLAN and IF STATE LAW ALLOWS A PARTIAL DISCLAIMER (not all states do so - requiring a COMPLETE disclaimer to be effective). Not always producing the result intended unless all of those ducks line up.

Second, the bene can accept the benefits then GIFT them to the niece - and that has tax consequences..... BIG tax consequences.

Bottom line, the distribution "scheme" is at the discretion of the participant (which is why it needs to be planned appropriately) and only limited options are available to the beneficiary.