Yes, you can leave your 401(k) to your child. You do it by naming your child on the plan’s beneficiary designation form, which controls who receives the account when you die and overrides anything your will says.1Office of the Law Revision Counsel. 29 USC 1055 – Requirement of Joint and Survivor Annuity and Preretirement Survivor Annuity If you are married, though, your spouse has to sign a written waiver first, and if your child is under 18 you need to set up a custodian or trust so the plan has an adult to pay. The choices you make on that form also shape how quickly your child has to withdraw the money and how much tax they owe.
Filing the Beneficiary Designation
The beneficiary designation is a form filed with your plan administrator, not something you handle through your will. Because federal law lets the form control, the account passes directly to whoever is named on it and skips probate, the court process that would otherwise review and distribute your assets.1Office of the Law Revision Counsel. 29 USC 1055 – Requirement of Joint and Survivor Annuity and Preretirement Survivor Annuity
The form asks for your child’s full legal name, date of birth, Social Security number, and relationship to you. Most plans let you complete it online through the employer’s benefits portal or through Human Resources. If your child does not yet have a Social Security number, you will need to obtain one before the form can be processed.2Social Security Administration. Social Security Numbers for Children
After you submit the form, confirm the change on your next plan statement. Review the designation again after any major family change: divorce, remarriage, or the birth of another child. An outdated form is one of the most common estate planning mistakes, because the plan pays whoever is named regardless of your current intentions.
Spousal Consent if You Are Married
Federal law gives your spouse an automatic right to your 401(k). Under ERISA and the Internal Revenue Code, a surviving spouse is the default beneficiary of the account.1Office of the Law Revision Counsel. 29 USC 1055 – Requirement of Joint and Survivor Annuity and Preretirement Survivor Annuity To name your child instead, your spouse has to sign a written waiver that:
- Acknowledges that they understand they are giving up their right to the account balance.
- Identifies your child (or another person) as the new beneficiary.
- Is witnessed by a notary public or an authorized plan representative.
Without that signed and witnessed consent, the plan administrator will pay the balance to your spouse no matter what the designation form says.3Office of the Law Revision Counsel. 26 USC 417 – Definitions and Special Rules for Purposes of Minimum Survivor Annuity Requirements If you are unmarried, the requirement does not apply and you can freely name your child.
If Your Child Is a Minor
Naming a child under 18 directly on the form creates a practical problem. Financial institutions generally will not distribute retirement funds to a minor, because minors cannot legally sign for large financial transactions. Without advance planning, a court would have to appoint a guardian to manage the money, a process with filing fees and ongoing court oversight.
Two arrangements avoid that.
One is a custodial designation under the Uniform Transfers to Minors Act. You structure the beneficiary line to name a custodian who will manage the funds for your child, phrased along the lines of “Jane Smith as custodian for [child’s name] under the [State] UTMA.” The custodian manages and distributes the money for your child’s benefit until the custodianship ends at the age set by state law, typically between 18 and 21. This works well for modest balances and keeps courts out of the picture.
The other is naming a trust. For larger accounts, or when you want detailed control over how and when the money is used, a trust document names a trustee and sets rules for distributions, such as limiting withdrawals to education expenses or releasing funds at specific ages. Certain requirements apply if you want the trust to pass through to your child’s own withdrawal timeline rather than a compressed schedule, so this route usually calls for a lawyer.4Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs)
Naming More Than One Child
You can name several children as primary beneficiaries by assigning each a percentage of the account. The percentages have to total 100%. Each child then follows the withdrawal rules independently based on their own age and situation. If you are married, spousal consent is still needed for any non-spouse beneficiary designation.3Office of the Law Revision Counsel. 26 USC 417 – Definitions and Special Rules for Purposes of Minimum Survivor Annuity Requirements
Consider naming contingent beneficiaries too. A contingent beneficiary inherits only if the primary beneficiary dies before you do. Naming your child as primary and your grandchild as contingent is a common pattern.
How Long Your Child Will Have to Withdraw the Money
The withdrawal clock your child faces depends on their age when they inherit.
Adult Children: The 10-Year Rule
The SECURE Act of 2019 replaced the older lifetime “stretch” approach with a 10-year rule for most non-spouse beneficiaries. An adult child who inherits your 401(k) must withdraw the full balance by December 31 of the tenth year after your death.5Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
Whether they also have to take an annual withdrawal during those ten years depends on whether you had already started required minimum distributions when you died. If you died before your required beginning date, your child can withdraw as much or as little as they want in years one through nine, as long as the account is empty by the end of year ten. If you had already begun RMDs, your child has to take at least a minimum amount each year, calculated from IRS life expectancy tables, with the full balance out by year ten.6Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions
Minor Children: Life Expectancy, Then Ten Years
Your own minor child is an “eligible designated beneficiary” and gets a more gradual schedule. For this purpose, the IRS treats anyone under 21 as a minor, regardless of your state’s general age of majority.7Internal Revenue Service. Internal Revenue Bulletin 2024-33
Until age 21, your child can take distributions based on their own life expectancy. Once they turn 21, the 10-year clock starts, and the account must be fully distributed by the time they turn 31.7Internal Revenue Service. Internal Revenue Bulletin 2024-33 That extended timeline lets the account keep growing on a tax-deferred basis through much of their early adulthood.
One boundary worth noting: this treatment applies only to your own children. Grandchildren, nieces, and nephews are subject to the standard 10-year rule regardless of their age.
Taxes Your Child Will Pay
Withdrawals from an inherited traditional 401(k) are taxed as ordinary income in the year they are received. Your child reports each distribution on their own return and pays at their personal rate. When the rules give them flexibility on timing, spreading withdrawals over several years can prevent one large tax spike.
Inherited 401(k) distributions are exempt from the 10% early withdrawal penalty regardless of your child’s age.8Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts A 25-year-old who inherits pays ordinary income tax on withdrawals but owes no additional penalty.
If your account is a designated Roth 401(k), qualified distributions to your child are completely tax-free.9Office of the Law Revision Counsel. 26 USC 402A – Optional Treatment of Elective Deferrals as Roth Contributions The Roth account has to have been open for at least five tax years for the distribution to be fully qualified. If it has not, the earnings portion may be taxed, though the original contributions still come out tax-free.10Internal Revenue Service. Retirement Topics – Beneficiary The same 10-year and minor-child timelines still apply to Roth accounts even though the money may come out tax-free.
Missing a required distribution triggers an IRS excise tax of 25% of the amount that should have been withdrawn.11Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs The penalty drops to 10% if the miss is corrected within two years.5Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) The hardest deadline is the end of the tenth year: any balance still in the account after that date is subject to the 25% excise tax.
How Your Child Will Claim the Account
After your death, your child (or their parent or guardian, if they are a minor) contacts the plan administrator to open the claim. The administrator will ask for a certified copy of the death certificate along with the beneficiary’s identification, Social Security number, and date of birth.
Once the claim is approved, your child typically has two choices:
- A lump-sum distribution, which pays the full balance at once. Simple, but for a traditional 401(k) it creates a large taxable event in one year.
- A trustee-to-trustee transfer into an inherited IRA, which preserves the tax-deferred (or tax-free, for Roth) status and lets your child spread distributions over the applicable timeline.
A non-spouse beneficiary cannot roll inherited 401(k) money into their own personal IRA; the inherited IRA has to stay titled as an inherited account. Some plans also narrow the choices or require distribution on a faster schedule than federal law allows, so it is worth reading the plan document early rather than assuming the full menu is available.