Can a Child Collect the Pension of a Deceased Parent?

When a parent passes away, one of the biggest financial questions families face is whether their children can receive any of their parent’s pension benefits. Unlike life insurance or retirement accounts, pensions have stricter rules that often limit who can inherit them, and children are rarely at the top of the list. Still, there are some exceptions and alternative retirement assets that may provide support. A financial advisor can review the specific pension plan and help families understand what benefits, if any, may be available.

Whether children can inherit a parent’s pension depends on the type of plan. Traditional defined-benefit pensions usually pay income for life to the retiree and sometimes a surviving spouse, but rarely to children unless a special option was chosen. By contrast, defined-contribution plans like 401(k)s work like investment accounts and can be left to heirs, including children, if they are named as beneficiaries.

Some pensions offer survivor benefit, usually for a spouse or sometimes for dependent children. Payments may continue if the child is underage, disabled, or financially dependent, but often stop once the child becomes an adult. Adult children rarely receive pension payments unless the plan allows it and the parent set it up ahead of time.

Beneficiary designations decide who inherits a pension or retirement account. If a pension offers a lump-sum payout, parents may be able to name a child as beneficiary. If forms are not updated, the plan’s default rules often give priority to a spouse. Reviewing beneficiary forms regularly can help make sure a parent’s wishes are followed.

Even when children are eligible to inherit pension assets, distributions can be complicated. A lump-sum payout may be allowed but often creates significant tax liability. Inherited retirement accounts may also be subject to specific withdrawal rules, such as the 10-year distribution rule under current IRS guidelines. Children who inherit these funds need to consider both the immediate tax bill and the long-term impact on retirement planning.

In most cases, pension payments end when both the retiree and spouse have passed away. Some plans make exceptions for dependent children, such as those under age 18 or still in school. These benefits are usually temporary and stop once the child becomes an adult or finishes school.

Another exception applies when a child has a qualifying disability. Certain pension plans and government programs allow ongoing survivor benefits for children who are unable to support themselves financially due to disability. These payments may continue for life, as long as the child meets the eligibility requirements set out by the plan administrator. Proof of disability is usually a requirement, and the rules can vary significantly by plan.

Some public sector and military pensions include provisions that extend benefits to children under specific conditions. For example, survivor benefits may be available if the child is under a certain age, enrolled in higher education or has a permanent disability. These rules are less common in private-sector pensions but are more common in government and service-related retirement systems.

Because these exceptions are rare and highly conditional, families should carefully review their pension plan’s rules to understand whether children may qualify. The definitions of terms like dependent or disabled can vary across plans, and the documentation required to prove eligibility can be extensive.

In most pension arrangements, a surviving spouse is the primary person eligible to inherit benefits. Many defined-benefit pensions are structured to provide lifetime income to the retiree and then continue paying a reduced benefit to the spouse if the retiree passes first. Federal law even requires certain pensions to prioritize spousal benefits unless the spouse has formally waived their right.

In limited cases, pensions with a lump-sum option may allow the account holder to name a non-spouse beneficiary. This could include an adult child, another family member, or even a trust. Such flexibility is more common in defined-contribution plans like 401(k)s than in traditional pensions. Naming a non-spouse beneficiary requires careful planning so the designation fits both the plan’s rules and the person’s estate strategy.

Some pension plans recognize domestic partners or common-law spouses as eligible beneficiaries, although this is far from universal. Eligibility often depends on state law or the specific policies of the pension plan. In these cases, the surviving partner may need to provide legal documentation proving the relationship in order to claim benefits.

If a pension does not allow broader inheritance options, individuals may turn to tools like life insurance, trusts, or investment accounts to provide for heirs beyond a spouse. Reviewing pension rules as part of an estate plan helps align retirement assets with the account holder’s wishes.

Pensions often limit who can inherit benefits, but 401(k)s and IRAs are more flexible. Children listed as beneficiaries can inherit these accounts, but most must withdraw the full balance within 10 years under the SECURE Act, which can lead to large tax bills.

If a parent leaves behind a Roth IRA, the child beneficiary may enjoy a more favorable outcome. Withdrawals are generally tax-free, as long as the account has been open for at least five years. This makes Roth accounts particularly attractive for wealth transfer. This is because children can inherit funds without the burden of additional income taxes.

Beyond retirement accounts, children may also benefit from life insurance policies or other employer-provided benefits. These payouts typically go directly to named beneficiaries and are not subject to the same restrictions as pensions. This can provide an additional layer of financial security for children when a parent passes away.

While most pensions are designed to provide income only to the retiree and their spouse, there are limited circumstances where children may qualify for benefits. More often, children inherit wealth through other retirement accounts like 401(k)s, IRAs or Roth IRAs. These come with their own distribution rules and tax considerations.

• A financial advisor can help you determine whether you have enough saved for retirement and recommend strategies to grow your nest egg. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Mandatory distributions from a tax-deferred retirement account can complicate your post-retirement tax planning. Use SmartAsset’s RMD calculator to see how much your required minimum distributions will be.

Photo credit: ©iStock.com/valentinrussanov, ©iStock.com/Daenin Arnee, ©iStock.com/FG Trade