Giving your kids any money you have left in your pension pot can be a good idea, but you need to know how the system works first.
I’ve done a lot of research on this question, and the good news is that, in most cases, you can leave your hard-earned pension to your daughter. But, as with anything financial, there are important details you need to know to make sure your wishes are carried out correctly.
Many people don’t realize that pensions aren’t automatically included in your will, This means you need to take specific actions to ensure your daughter receives your pension benefits after you pass away, Let’s break down everything you need to know about passing your pension to your daughter
The Basics: Types of Pensions and Their Inheritance Rules
Before diving into the specifics, we gotta understand that different pension types have different rules:
Defined Benefit (DB) Plans
These plans offered by employers promise a certain amount of money when the employee retires, usually as a monthly annuity. These usually have rules that say spouses should be the main beneficiaries. If you want to name someone else, like your daughter, as the main beneficiary, you may need your spouse’s permission.
Defined Contribution (DC) Plans
These include 401(k)s, 403(b)s, and IRAs. They usually give you more options for choosing who gets the money, which makes it easier to name your daughter directly.
As of 2025, the rules allow you to nominate anyone as a beneficiary of your pension, not just relatives This is good news if you want to leave your pension to your daughter
Important Changes Coming in 2027
Take note! The Autumn 2024 Budget says that from 2027 on, pensions will be subject to inheritance tax. This is a big change from the way things work now, where pensions are not part of your estate and are not subject to Inheritance Tax (IHT). In other words, if you’re making plans for the future, you should know that the tax breaks you can get now won’t last forever.
How to Designate Your Daughter as Your Pension Beneficiary
If you want to leave your pension to your daughter, you’ll need to complete these steps:
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Fill out an Expression of Wish form – This is crucial because your pension is NOT included in your will. You need to fill out this form with each pension provider if you have multiple pensions.
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Gather necessary information – You’ll need your daughter’s full legal name date of birth Social Security Number, and current mailing address to properly designate her.
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Submit the designation form – This can typically be done online through a portal, by mail, or sometimes in person at a local branch office.
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Request confirmation – Always get written confirmation that your beneficiary designation has been processed and recorded.
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Keep copies of everything – Store copies of all submitted documents and confirmation notices in your personal files.
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Review periodically – Check your beneficiary designations every few years or after significant life events to make sure they remain current.
What If Your Daughter Is a Minor?
If your daughter is under 18, things get a bit more complicated. Direct designation of a minor is often not permitted due to legal complexities. Instead, you’ll need to:
- Designate a custodian under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA), or
- Establish a trust, which then becomes the beneficiary of your pension
In either case, you’ll need additional documentation and information about the custodian or trust.
Tax Implications When Your Daughter Inherits Your Pension
When your daughter inherits your pension, she’ll face certain tax implications:
If You Die Before Age 75
Any money held in your personal pension or defined contribution pension can be left to your daughter as a tax-free income or tax-free lump sum. This is a significant benefit!
If You Die After Age 75
Your daughter will only have to pay her marginal rate of income tax on the inherited pension. Additionally, under the SECURE Act of 2019, most non-spouse beneficiaries (including children) must fully distribute the inherited account within 10 years following the original owner’s death. This is known as the “10-year rule.”
Your daughter can choose to:
- Take distributions all at once as a lump sum
- Spread them out over the 10-year period
But either way, the entire balance must be withdrawn by the end of the tenth year, and each distribution will be taxed at her individual income tax rate for that year.
Don’t Forget About Your Tax-Free Lump Sum!
An important tip: You should take your 25% tax-free cash lump sum from your pension before you turn 75. If you don’t, it will be taxable later. Your daughter won’t be eligible to take this tax-free lump sum, so if you don’t take it yourself, you’ll lose this tax benefit.
However, be careful about what you do with this lump sum. If you take it but don’t use it before you die (e.g., if it’s sitting in your bank account), it will become part of your estate and might be subject to Inheritance Tax.
What Happens If You Don’t Designate a Beneficiary?
If you pass away without designating a beneficiary for your pension, the assets will follow the default rules of your specific plan or state law. This typically means:
- Many plans specify that a surviving spouse becomes the default beneficiary
- If there’s no surviving spouse, pension assets may go to your estate
- When assets pass through your estate, they become subject to probate – a potentially lengthy and costly process
This can lead to unintended outcomes, as funds will be distributed according to your will or state intestacy laws, which might not align with your wishes to leave the pension to your daughter.
Case Study: Leaving a Pension to a Child
Let me share a relevant case study from my research:
Emily’s Story
Emily had an employee pension plan with a survivor’s benefits clause, but she and her spouse decided to waive those benefits. Instead, they wanted to leave all or part of the benefits to their child. Emily and her spouse completed and signed a written waiver, specifying their alternate plan, and had the statement notarized and legally verified. This allowed them to allocate the pension benefits to their child in the event of their passing.
Different Options for Pension Inheritance
Depending on your pension type, you might have various options for how your daughter receives the benefits:
Lump Sum Payment
Some pensions offer the option of a lump sum payment to beneficiaries. This gives your daughter immediate access to the full amount.
Annuity or Regular Payments
Other pensions might pay out to your daughter as regular payments over a period of time.
Guaranteed Pension Period
Some plans offer a guaranteed pension period (e.g., 10 years). If you pass away during this period, your daughter would receive the benefits for the remainder of the guaranteed time.
Frequently Asked Questions About Leaving Pensions to Children
Q: Can I transfer my pension to my daughter while I’m still alive?
A: Typically, pensions cannot be transferred to someone else during your lifetime. Instead, you designate beneficiaries to receive payments upon your death.
Q: Is there a limit to how much of my pension I can leave to my daughter?
A: Generally, you can leave your entire pension to your daughter if you choose, but if you have a spouse, there may be requirements to get their consent.
Q: What happens if both my spouse and I die?
A: If you’ve designated your daughter as a secondary beneficiary, she would receive the pension benefits. Otherwise, the pension might revert to the plan or be paid out according to plan rules.
Q: Can I leave different percentages of my pension to different children?
A: Yes, you can typically nominate multiple beneficiaries and specify what percentage each should receive.
Steps to Take Now
If you’re serious about leaving your pension to your daughter, here’s what you should do today:
- Contact your pension provider(s) to understand the specific rules and options for your plan
- Request an Expression of Wish form from each provider
- Consider consulting with a financial adviser who specializes in pension planning
- Document your wishes clearly and ensure your family knows your intentions
- Review your overall estate plan to ensure it works in harmony with your pension beneficiary designations
Final Thoughts
Leaving your pension to your daughter is usually possible, but it requires specific actions on your part. Don’t assume it will happen automatically through your will. With proper planning, you can ensure your hard-earned pension benefits provide financial security for your daughter after you’re gone.
Remember that tax laws are changing, with pensions becoming subject to inheritance tax from 2027. This makes it even more important to plan ahead and consider how these changes might affect your daughter’s inheritance.
Have you already taken steps to leave your pension to your daughter? What challenges have you faced? I’d love to hear about your experiences in the comments below!
Disclaimer: This article provides general information only and should not be considered financial or legal advice. Pension rules can vary widely depending on your specific plan and location. Please consult with a qualified financial advisor or legal professional before making decisions about your pension.
Who you can leave your pension to
You can give away any money left in your defined contribution pension when you die. This is because you build up a pot of money to live off of when you retire.
You can say who you would like to receive your pension. This person, or people, are your pension beneficiaries. You can do this when you first take out your pension, by filling in a ‘nomination of beneficiary’ form, but it can be updated at any time. In this article, we’ll focus on what happens if you leave your pension to your children. Many people choose family members, but it can be passed onto anyone.
Can my children inherit my pension?
What your children get depends on what type of pension scheme you were in. Money from pensions after death are called pension death benefits. There are two types of private pension death benefits depending on whether the pension was a defined benefit pension scheme, where you receive a guaranteed income until you die, or a defined contribution pension scheme, where you build up a pot of money.
When a child is under 23, they may be able to inherit a defined contribution pension or a defined benefit pension. There is a lot of detail about the different ways in which private pensions are dealt with in our article on what happens to your pension when you die.