The plan trust
Your Solo 401(k) is structured as a trust, and you are its trustee. At your death, the trust does not dissolve automatically. It continues until it is properly wound down. If you named a successor trustee, that person steps in to administer the trust, manage open transactions, liquidate or transfer assets as needed, and facilitate distribution to your beneficiaries.
If no successor trustee is named, a beneficiary may eventually assume an administrative role, but the process is slower and more complicated. Particularly when the plan holds illiquid assets.
Transfer or distribution
As with an IRA, there are two possible outcomes for the plan assets: they can be transferred into an inherited account in the beneficiary's name, or the beneficiary can elect a full distribution. The right path depends on the beneficiary's relationship to the plan holder, their tax situation, and applicable distribution rules.
Spousal beneficiaries
Under ERISA, your spouse is the default primary beneficiary of your Solo 401(k). A surviving spouse who inherits the plan has several options. They can roll the funds into their own IRA or Solo 401(k), treating the assets as their own going forward. Alternatively, they can elect to treat the account as an inherited plan, which allows distributions without the early withdrawal penalty if they are under age 59½. If the surviving spouse qualifies to sponsor a Solo 401(k), they may also be able to continue the existing plan in their own name.
Non-spouse beneficiaries
Non-spouse beneficiaries generally must distribute the full account within 10 years of the plan holder's death. Certain beneficiaries, including minor children of the plan holder, disabled or chronically ill individuals, and individuals not more than 10 years younger than the original owner, may qualify for extended distribution timelines based on life expectancy. Non-person beneficiaries such as estates or charities face a shorter 5-year distribution window.
Distribution rules in this area are complex and have evolved through recent legislation. Consult a qualified tax or estate planning professional to understand the options available to your beneficiaries.
Plan continuation or termination
A Solo 401(k) can only be sponsored by a self-employed individual or small business owner with no full-time employees other than an owner-spouse. This eligibility requirement does not disappear at the plan holder's death — it applies to whoever inherits the plan.
If the surviving spouse has an active role in the business and independently meets the sponsorship requirements, they may be able to assume the plan and continue it in their own name. In that case, the plan remains open and the surviving spouse becomes the plan holder going forward.
In all other cases, including non-spouse beneficiaries and spouses without an active business role, the plan must be terminated. Assets are then either distributed to the beneficiaries or rolled over into eligible accounts such as an IRA or another qualified plan, subject to applicable distribution rules and tax treatment.
A note on plan records
There is no custodian or brokerage maintaining a statement of your Solo 401(k) holdings. Your beneficiaries and Successor Trustee will only know what the plan holds if you have kept and shared that information in advance. Maintain up-to-date records of your plan investments and keep them in a location known to the person administering your affairs.