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How can I show a potential distribution to a non-spouse beneficiary in a 401(k) account?

Submitted by pfmaven on 26 February 2011 - 5:19pm

I am setting up a profile for a client where both the husband and wife have 401(k)accounts. It is a second marriage for both and they each name the other as beneficiary for 50% of their 401(k) accounts. The other 50% of each account goes to children from their first marriages. The amount paid to the children will vary as the value of the 401(k) account changes and there may never be a payment if the the total account(s) are consumed while the husband and wife are still alive. I have entered 50% of the current value as a special bequest in the estate entry screen but that does not account for the changing value so the report values for future years will be incorrect. I think it also affects the life insurance recommendation.

Any suggestions would be appreciated.

Thanks,

Gary

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Submitted by Laurence Kotlikoff on 4 March 2011 - 12:10am.
1

Hi Gary,

Let's do this. Enter only 50 percent of the 401(k) assets in the Retirement Accounts assets balances screen.

Also, enter as a taxable special receipt the withdrawals on the other 50 percent of the 401(k) assets.

Turn on contingent planning. Enter zero contingent special receipts if you die or if your wife dies.

Call me if this is unclear, but I'm quite sure it does what you want.

best, Larry

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