Yes, your child can inherit your 401(k). You name the child on the plan’s beneficiary designation form, and at your death the balance transfers directly to them without going through probate. If you’re married, there’s one gate to clear first: your spouse has an automatic legal right to the account and must sign a written waiver before your child can be named. After that, how quickly your child must withdraw the money, and how much tax they’ll owe, depends on whether the child is a minor or an adult and on how old you were when you died.
The Beneficiary Form Controls, Not Your Will
A 401(k) is a non-probate asset. When you die, the balance goes to whoever is listed on the plan’s beneficiary designation form. It does not pass through your will, and a probate court has no say. This holds even if your will names someone else. Federal law under ERISA preempts state inheritance rules for employer-sponsored retirement plans, so the name on the plan form controls.1U.S. Department of Labor. FAQs About Retirement Plans and ERISA
Keeping that form current matters far more than updating your will. If you named an ex-spouse years ago and never changed it, the ex-spouse will receive the balance no matter what your will says or who you’ve since married. Courts have consistently enforced plan designations over contradictory wills.
If You’re Married, Your Spouse Has to Sign Off
Federal law automatically designates your surviving spouse as the default beneficiary of your 401(k).1U.S. Department of Labor. FAQs About Retirement Plans and ERISA To name your child instead, your spouse must sign a waiver that identifies the child as the replacement beneficiary. The waiver has to be witnessed by either a plan representative or a notary public.2Office of the Law Revision Counsel. 29 U.S. Code 1055 – Requirement of Joint and Survivor Annuity and Preretirement Survivor Annuity
Without that signed, witnessed waiver, the plan administrator is legally required to pay your spouse regardless of what the beneficiary form says. The waiver also has to specifically acknowledge the effect of giving up the spousal right; a generic signature on the beneficiary form alone won’t do it. If you’re unmarried, none of this applies and you can name any child freely.
Adult Children: The 10-Year Rule
Since 2020, most adult children who inherit a 401(k) must withdraw the entire balance within 10 years of the owner’s death. The deadline lands on December 31 of the tenth year. Before the SECURE Act passed in 2019, non-spouse beneficiaries could stretch distributions over their own life expectancy, sometimes for decades. That option is gone for most adult children.3Internal Revenue Service. Retirement Topics – Beneficiary
A few narrow exceptions still allow longer payout periods. An adult child who is disabled or chronically ill qualifies as an eligible designated beneficiary and can stretch withdrawals over their life expectancy. A beneficiary no more than 10 years younger than the deceased account holder also qualifies, though that rarely fits a parent-child inheritance.
Missing the 10-year deadline triggers an excise tax of 25% on whatever should have been withdrawn but wasn’t.4Internal Revenue Service. 2025 Instructions for Form 5329 – Additional Taxes on Qualified Plans The IRS can waive the penalty if your child shows the shortfall was due to reasonable error and they’re fixing it. That’s done by filing Form 5329 with a written explanation.
Annual Withdrawals Inside the 10-Year Window
The 10-year rule is not always “empty the account by year 10 and nothing before then.” Whether your child must take annual withdrawals during the window depends on how old you were when you died. If you died before reaching your required minimum distribution age, your child can withdraw on any schedule as long as the balance hits zero by the end of year 10. They could even wait until the final year.5Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions
If you died after reaching your required beginning date, your child must take an annual minimum every year during the 10-year period and still empty the account by year 10. The required beginning date is currently age 73, and it rises to age 75 in 2033 for those born in 1960 or later. Missing even one of these annual withdrawals triggers the same 25% excise tax.4Internal Revenue Service. 2025 Instructions for Form 5329 – Additional Taxes on Qualified Plans Many beneficiaries learn about the 10-year deadline and have no idea about the yearly minimums along the way.
Minor Children Get Better Treatment
A minor child of the deceased qualifies as an eligible designated beneficiary under the SECURE Act, which lets them stretch withdrawals over their life expectancy instead of following the 10-year rule.3Internal Revenue Service. Retirement Topics – Beneficiary The stretch lasts until the child turns 21. On that birthday, the 10-year clock starts, and the remaining balance has to come out within those 10 years.
The federal rule uses age 21 specifically, not the state age of majority. Even in states where legal adulthood begins at 18, the stretch continues to 21 for an inherited 401(k).
One important boundary: this exception applies only to the account owner’s own child. Grandchildren, stepchildren who were never legally adopted, nieces, and nephews do not qualify as minor children of the deceased for this purpose. They fall under the standard 10-year rule regardless of their age.
What Your Child Will Owe in Taxes
Every dollar withdrawn from an inherited traditional 401(k) counts as ordinary income on your child’s tax return for that year. It’s taxed at their regular income tax rate, the same way it would have been taxed if you had withdrawn it yourself.6Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust There’s no special inheritance tax rate or exemption for retirement account distributions. A large lump-sum withdrawal can push your child into a higher bracket for the year.
If the plan administrator sends a check directly to your child rather than transferring the funds into an inherited IRA through a trustee-to-trustee transfer, the administrator must withhold 20% of the distribution for federal income taxes upfront.7eCFR. 26 CFR 31.3405(c)-1 – Withholding on Eligible Rollover Distributions That 20% isn’t a penalty; it’s prepaid tax. But it means your child receives only 80% up front. A direct rollover into an inherited IRA avoids the mandatory withholding and gives your child more control over the timing of withdrawals and the tax hit.
Roth 401(k)s Change the Tax Picture
Inherited Roth 401(k) accounts work differently. If the original account met the five-year aging requirement before your death, distributions to the beneficiary are generally federal tax-free. If the five-year period wasn’t satisfied, the earnings portion of distributions may be taxable. Your child still has to follow the 10-year timeline (or the stretch rules if they qualify as a minor), but the tax hit is dramatically lower or nonexistent.
The Kiddie Tax on a Minor’s Withdrawals
When a minor child receives 401(k) distributions, the withdrawals count as unearned income. If the child’s total unearned income exceeds $2,700 in a tax year, the kiddie tax rules may apply, taxing a portion of the income at the surviving parent’s higher marginal rate rather than the child’s lower one.8Internal Revenue Service. Topic No. 553 – Tax on a Childs Investment and Other Unearned Income Professional tax advice pays for itself here, especially with a larger balance.
Getting the Money to a Minor
Financial institutions cannot hand retirement account assets directly to a minor. A child under 18 lacks the legal capacity to hold and manage the account, so an adult intermediary is required. The two common arrangements are custodial accounts and trusts.
A custodial account under the Uniform Transfers to Minors Act lets a named custodian manage the inherited funds on the child’s behalf. The custodian invests the money and can spend it for the child’s benefit until the child reaches the age set by state law, at which point control transfers to the child outright. It’s simple, but the downside is real: once the child reaches the transfer age, they get full, unrestricted access to the entire balance.
A trust gives you more control. By naming a trust as the 401(k) beneficiary, you can set conditions on when and how the money is released. A trustee manages the funds according to your written instructions, which might restrict distributions to education, healthcare, or certain milestone ages. Trusts cost more to set up and maintain, but for a larger inheritance they prevent a 21-year-old from going through a six-figure balance in a year. If neither a custodian nor a trust is named, a court will appoint a guardian to manage the funds, which adds legal fees and ongoing court oversight.
Filling Out the Beneficiary Designation Form
The beneficiary designation form is the single most important document in this process. Getting it right takes about 10 minutes. You’ll find it through your employer’s HR portal or the site of whichever company administers your plan.
The form asks for each beneficiary’s full legal name, date of birth, Social Security number, and residential address. The Social Security number is needed for tax reporting once distributions begin. If you’re naming multiple children, you’ll assign each one a percentage of the account, and those percentages have to total exactly 100%.
If your beneficiary is a minor, include the name of the custodian or the trust that will manage their share. Name contingent beneficiaries too. A contingent beneficiary receives the funds only if the primary beneficiary dies before you. Without them, the account defaults to the plan’s rules, which may send the balance to your estate and into probate.
Review the form every few years and after any birth, death, divorce, or remarriage. The names on it override your will, so a set-and-forget approach is one of the most common estate planning mistakes.
If You Never Name a Beneficiary
When the account holder dies without a beneficiary designation on file, the plan’s own governing documents control where the money goes. Many plans have a default order, commonly spouse first, then children, then the estate. But every plan is different, and some simply direct the balance to the estate, which sends it through probate.
Once the 401(k) lands in the estate, the funds also lose the flexibility of an inherited IRA rollover. The estate itself becomes the beneficiary, which typically means the entire balance has to be distributed within five years if the owner died before their required beginning date, rather than the 10-year window a named individual would have.3Internal Revenue Service. Retirement Topics – Beneficiary That shorter timeline compresses the tax hit into fewer years. Naming a beneficiary is free and takes minutes; not naming one can cost your child thousands in lost flexibility and higher taxes.