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April 19, 2009

De Facto Beneficiary

Your Guide

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A party who is treated as the beneficiary of a retirement account under the default provisions of the retirement account plan document.
A de facto beneficiary usually exists when the retirement account owner either fails to name a beneficiary for his retirement account, or is predeceased by his named beneficiary(ies) and (a) there is no contingent beneficiary and/or (b) no replacement beneficiary is named.
Also known as default beneficiary
Referring Cite
The governing plan document
Additional Helpful Information
  • For qualified plans and ERISA 403(b) accounts, the de facto beneficiary is usually the surviving spouse of the retirement account owner.
  •  Many plan documents provide for a succession of de facto beneficiaries, in the event that the first line of de facto beneficiary does not survive the retirement account owner.  For example :
oThe spouse is the beneficiary;
oIf there is no surviving spouse, the surviving children are the beneficiaries-Per Stirpes or Per Capita;
oIf there is no surviving spouse or surviving children, the estate of the retirement account owner is the beneficiary.
  • Some de facto lines go from spouse directly to estate. Others go directly to the estate; however, this usually is not the case with qualified plans and ERISA 403(b) plans, as the spouse is almost always included in the de facto line.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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