Though you are technically allowed to name a minor child as beneficiary of your 401(k), IRA, or other employment-sponsored retirement accounts, it’s never a good idea. Minor children cannot inherit the account until they reach the age of majority—and then when they do reach the age of majority, they will receive the funds outright with no guidance or control over what they do with the money. If a minor is listed as the beneficiary, upon your death your retirement account would be distributed to a court-appointed guardian, who will be in charge of managing the funds (often for a fee) until the age of majority. If you want your child to inherit your retirement account, it may be better to set up a trust to receive those assets instead. You can then name a trustee to manage the account until your child comes of age. By doing so, you get to choose not only who would manage your child’s money, but within the trust’s terms, you can stipulate how and when the account’s funds should be distributed and used, which can help them from being lost or squandered.
As your Personal Family Lawyer®, we can help you create a trust to hold your 401(k) for your minor children to ensure your heirs get the maximum benefit from your retirement savings.