I believe that could totally depend upon their personal tax situation. Good for you on keeping your beneficiary information up to date. So many people forget.

First of all, depending on what state you live in, your friend may have to pay state inheritance tax. I would recommend you look at the Register of Wills internet site for your state to see if there is a state inheritance tax and what percentage it is. Secondly, your friend will have to pay income tax on the distributions. The most important concern for your friend is whether you die before or after the required beginning date. If you die before the required beginning date, your friend must make distributions over his remaining life expectancy using the required minimum distribution single life table. If you die after the required beginning date, distributions must continue using your remaining life expectancy using the single life table. There is, however, one very tricky rule your friend needs to be aware of. There is something called the five year rule. To avoid this rule, if you die before the required beginning date, your friend must start distributions by December 31 of the year after your death. If he does not do this, the entire amount must be distributed over five years. This can cause a very serious income tax problem for your friend if the amount in the 401k is large. For example, if the 401K has a balance of $400,00, your friend, if he misses the December 31st date, would have to take $80,000 the first year, then the next year add interest earned and divide by 4 and do that each year until the account is empty. This $80,000 will push him into a higher tax bracket. Your friend should be in contact with a good Certified Financial Planner or Certified Public Accountant. If something should happen to you first, he should sit down and discuss what rules he should follow in making distributions.