Can Your Child Inherit Your 401(k)?

What You Need to Know About Solo 401(k) Beneficiaries

When most people think about their 401(k) or solo 401(k), they focus on contribution limits, tax savings, and investment growth. What happens to that account after you pass away often gets pushed to the back of the planning queue — and that’s a costly mistake.

What happens to your 401(k) when you pass away?

More specifically:

Can your child inherit your 401(k) or Solo 401(k)?

The good news: yes, your child can absolutely inherit your 401(k) or solo 401(k). But the rules governing how they receive it, how fast they must withdraw it, and how much tax they’ll owe are more complex than most people realize. Here’s what you need to understand.

Watch: Learn about the 401k children beneficiary rules

Who can be named as beneficiary?

You can name any of the following as a beneficiary of your 401(k) or solo 401(k):

Can a Child Be a Beneficiary of a 401(k)?

Yes—you can absolutely name your child as a beneficiary of your 401(k), including a Solo 401(k).

However, there are a few important rules:

If You Are Married

Your spouse is automatically the primary beneficiary
To name your child instead, your spouse must provide written consent

If You Are Not Married

You can freely name your child as your primary beneficiary

Key takeaway: Always keep your beneficiary designations updated.

What Happens When Your Child Inherits Your 401(k)?

When your child inherits your 401(k), they are considered a:

Non-spouse beneficiary

When your child inherits your 401(k) or solo 401(k), they are treated as a non-spouse beneficiary. That distinction matters enormously — different rules apply compared to a surviving spouse, who has far more flexibility.

The 10-Year Rule Explained

The most significant rule for non-spouse beneficiaries is the 10-Year Rule, established by the SECURE Act and updated by SECURE Act 2.0. It requires that your child must fully distribute the inherited account within ten years of your death. But how distributions must be taken along the way depends on one critical variable: whether you passed away before or after your Required Beginning Date (RBD).

Your Required Beginning Date is the date by which you must start taking Required Minimum Distributions (RMDs) from your 401(k). Under current law, that age is 73.

Under the SECURE Act, most non-spouse beneficiaries (including children) must follow the:

10-Year Rule

The entire account must be fully distributed within 10 years

However, how distributions work depends on your age at death:

Scenario 1: You Pass Away AFTER Age 73 (RMD Age)

Your child must:

Take annual required minimum distributions (RMDs) in years 1–9
Fully withdraw remaining funds by year 10

This can accelerate taxes if the account is pre-tax.

Because Fred passed away after his required beginning date, Jason cannot simply wait until year 10 to take everything. He must take annual RMDs in years 1 through 9, based on his own life expectancy, and then distribute whatever remains by the end of year 10. This is the more restrictive outcome.

Also note: a solo 401(k) is tied to an owner-only business. Once the plan owner passes away, the business ceases — so the inherited funds must be transferred out of the solo 401(k) and into a beneficiary IRA before distributions can begin.

Scenario 2: You Pass Away BEFORE Age 73

Your child:

Does NOT need to take annual distributions
Can let the account grow tax-deferred
Must withdraw everything by the end of year 10

When the account owner passes away before their required beginning date, the non-spouse beneficiary gets significantly more flexibility. Jason doesn’t have to take any distributions in years 1 through 9 — he can let the inherited funds continue growing tax-deferred and take everything in year 10, or spread it however makes sense for his tax situation across the full decade.

This creates a powerful tax-deferral opportunity.

What Happens to a Solo 401(k)?

A Solo 401(k) cannot continue after the owner’s death.

Instead:

The account must be transferred to a
Beneficiary IRA (Inherited IRA)

This allows your child to:

Maintain tax advantages
Follow the 10-year withdrawal rules

Traditional vs. Roth 401(k): Big Difference for Your Child

How much tax your child pays on the inherited account depends entirely on what type of contributions funded the account:

Traditional (Pre-Tax) 401(k)

Inherited pre-tax (traditional) 401(k): Every distribution your child takes will be taxed as ordinary income in the year it’s received. Timing matters — large distributions in a high-income year can push your child into a higher tax bracket.

Distributions are taxed as ordinary income
Large withdrawals may push your child into a higher tax bracket

Roth 401(k)

Inherited Roth 401(k) or Roth solo 401(k): Distributions are generally tax-free, provided the account has been open for at least five years. This is a significant inheritance advantage — your child can take distributions over the 10-year window without a tax bill.

Distributions are generally tax-free
Still subject to the 10-year rule
Often more favorable for beneficiaries

This is why many investors consider:

Roth contributions
In-plan Roth conversions
Mega Backdoor Roth strategies

Special Rule for Minor Children

If your child is under age 21 at the time of your death, different rules apply. A minor child qualifies as an Eligible Designated Beneficiary (EDB), which means the 10-year clock doesn’t begin running until the child turns 21. At that point, the standard 10-year rule kicks in — giving them up to 10 additional years to fully distribute the account.

This exception is designed to protect young children from being forced to liquidate a large inheritance too quickly. Once the child reaches adulthood, however, they lose EDB status and must complete distributions within the standard 10-year window.

If your child is under age 21:

They can take distributions based on life expectancy
The 10-year clock starts at age 21

This allows for additional tax-deferred growth.

Steps Your Child Must Take After Inheriting

Transfer the inherited 401(k) or solo 401(k) into a properly titled beneficiary IRA (“IRA for the benefit of [Child’s Name] as beneficiary of [Your Name]”).
Determine whether distributions must begin immediately or can be deferred, based on your age at death relative to your RBD.
Consult a tax advisor to plan the most tax-efficient distribution strategy across the 10-year window.
Ensure full distribution of the remaining balance by December 31 of the tenth year following your death.

The 5-Year Rule (Important Exception)

The 5-year rule applies in limited situations:

No beneficiary was named
The estate becomes the default beneficiary

In this case:

The entire account must be distributed within 5 years

This can result in significantly higher taxes.

Smart Planning Strategies

To protect your child and optimize tax outcomes:

1. Always Name a Beneficiary

Avoid defaulting to your estate

2. Keep Beneficiaries Updated

Especially after:

Marriage
Divorce
Birth of a child

3. Consider Roth Strategies

Reduce future tax burden for your child
Enable tax-free inheritance

4. Avoid Naming Your Estate

Triggers the unfavorable 5-year rule

5. Consider a Living Trust (Advanced Strategy)

Provides control over distributions
Helps manage how assets are passed down

How a Self-Directed Solo 401(k) Helps

A self-directed solo 401(k) — such as one established through a dedicated plan provider — offers advantages that go well beyond a standard employer-sponsored plan. You can name and update beneficiaries easily, designate contributions as pre-tax or Roth, and use advanced strategies like the Mega Backdoor Roth to convert voluntary after-tax funds into tax-free retirement wealth that passes to your child with no income tax obligation.

A properly structured solo 401(k) also gives you the option to name a trust as the beneficiary — useful if you want to control how and when funds flow to a minor child or protect assets for a child with special needs.

With a self-directed Solo 401(k), you gain:

Flexibility to update beneficiaries anytime
Ability to implement Roth and Mega Backdoor Roth strategies
Greater control over estate and tax planning

This allows you to align your retirement strategy with your legacy goals.

Common Mistakes to Avoid

Not naming a beneficiary
Forgetting to update beneficiary designations
Ignoring tax implications for heirs
Naming your estate unintentionally

Final Thoughts

Yes, your child can inherit your 401(k) or solo 401(k) — but the outcome depends heavily on the planning you do today. Name a beneficiary. Keep that designation updated. Understand whether your account is pre-tax or Roth, and consider what that means for your child’s tax bill. And if you want to give your heirs the most flexibility — with the least tax exposure — a self-directed solo 401(k) with Roth and Mega Backdoor Roth capabilities is one of the most powerful tools available.