A beneficiary is the person or entity that inherits your 401(k) savings if you pass away. Naming a beneficiary helps make sure your retirement funds go where you want them to. It also saves your loved ones from a long legal process. This article covers how to choose beneficiaries for your Gusto 401(k) and how marital status affects your options. It also explains the types of beneficiaries you can name and what happens if you do not name one.
Important: A 401(k) plan does not follow your will. If you name a beneficiary in your will but do not name them through your Gusto Retirement account, your funds will be distributed based on the plan's default rules — not your will.
When setting up your Gusto 401(k), you will be asked to designate a beneficiary. You can also view or update your beneficiary within your Gusto Retirement dashboard.
Choose the path that matches how you signed in.
Sign in to Gusto and go to Benefits. Under Savings, find 401(k) and select View, then select Manage 401(k)
Sign in directly at the Gusto Retirement sign-in page.
Once you're in your 401(k) dashboard, follow these steps to update your beneficiary.
Go to Settings, then Personal Settings.
Select Beneficiaries.
Click Edit to make changes.
Your marital status plays a major role in who can be your beneficiary.
If you’re single, you can choose anyone as your beneficiary, like a parent, sibling, or other loved one.
Your spouse is automatically your sole primary beneficiary, no matter who you named before. A “spouse” refers to any individual who is lawfully married under any state law, including same-sex marriages.
If you want to name someone other than your spouse:
Your spouse needs to provide notarized, written consent
If you want to change your beneficiary again later, your spouse needs to provide new notarized consent each time
Your former spouse's rights to your account are not automatically removed. This is true even if you have a domestic relations order (DRO) that gives them part of your balance. It is also true if they agree to give up rights to your 401(k) assets. If you no longer want your former spouse listed, you need to update your beneficiary.
Important: Review and update your Gusto Retirement account whenever your marital or familial status changes. If you go from single to married and forget to update your marital status, the law still automatically applies.
Primary beneficiaries are first in line to inherit your retirement savings.
Secondary beneficiaries inherit your savings only if all primary beneficiaries are unable to claim the funds. Naming a secondary beneficiary helps make sure there is always someone in line to get your 401(k). This protects your funds even if you forget to update your designations over the years.
If a primary beneficiary cannot inherit your funds, their share is split evenly among the other primary beneficiaries. Secondary beneficiaries only claim funds if no primary beneficiaries are left.
You can select up to 10 primary beneficiaries and 10 secondary beneficiaries.
Pro tip: Once you select your beneficiaries, notify those people or organizations so they know to contact us if they need to claim their benefits.
You can generally leave your Gusto 401(k) to the following types of beneficiaries:
Individuals
Trusts
Charities
A few notes on specific beneficiaries are below.
You can name a minor as a beneficiary. However, if the minor has not turned 18 by the time they inherit your 401(k), a court will need to appoint a legal guardian to get the money on their behalf. The guardian has a legal requirement to act only in the minor's best interest.
When setting up a trust, consider talking to an estate attorney to make sure it meets all legal requirements. Otherwise, your beneficiaries may face big tax problems or be disqualified.
You can name a non-individual entity, like a charity or for-profit organization, as a beneficiary. Keep in mind:
For-profit businesses would need to get all the funds at once, which could cause tax problems
Charities can benefit from 100% tax-free income
If you name a charity, make sure the charity's tax ID is included on the Account settings page. If you pass away, we will contact the charity directly to arrange the transfer of funds.
You can name your estate as your beneficiary. This may be a good choice if all your other beneficiaries are unable to inherit, or if you prefer. The executor — the person who manages your estate — has 2 options:
Contact us and have a notarized Small Estate Affidavit prepared
Go through probate to get an IRS letter for the probated estate
If you do not name a beneficiary, or if none of your beneficiaries survive you, your account will be distributed in the following order:
Surviving spouse.
Children (split equally).
Parents (split equally).
Your estate.
To make sure your assets go where you want, add a beneficiary in your Gusto Retirement account.