What is Complete Estate Planning for a Proprietor’s 401(k) Plan Benefits?

Abstract

The estate planning of an individual who owns a professional or other enterprise that maintains a tax-advantaged plan, such as a self-directed 401(k) plan, requires more than the completion and filing of the individual’s plan beneficiary designations.

Complete planning requires that measures also be taken so that soon after the death of the individual a person be authorized to invest plan assets, determine the plan beneficiary(ies) and benefit entitlements, give notifications of such determinations, and make plan distributions that the beneficiary(ies) may choose.

If this is not done, the delay in making investment decisions and giving the individual’s beneficiary(ies) access to their plan benefits may place those benefits at substantial risk and expose the individual’s estate to fiduciary liability claims.

Keywords: Retirement, estate planning, financial planning, pensions, savings, 401(k) plans, profit-sharing plans, fiduciary, administrator, investment manager, designations, IRA, participant, beneficiary, income tax, tax deferral

JEL Classification: J32, K34, K36, K39