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Divorce/Separation Post Reply     Print Topic    
User Topic: Important: 401(k) accounts, divorce, and inheritance
josie11
♀ Member
Member # 31648
Default  Posted: 1:51 AM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

If anyone reading this has a STBX or XWS who

a. plans to remarry sooner or later

b. owns a 401(k) account

c. has children with you

Please be aware that, on the day he/she remarries, the new spouse becomes 100% vested as the inheritor of their spouse's 401(k) account. According to ERISA law, it does not matter if your XWS names a different beneficiary (his/her children, for example). By law, the surviving spouse inherits 100% of the 401(k) account. Any beneficiary named by the 401(k) account owner is trumped by the right of the surviving spouse. Even in the case of a will stating that the funds should go to someone other than the surviving spouse, the surviving spouse MUST inherit. Surviving children have contested this law in court, and they have all lost to the surviving spouse.

There are only two ways around this problem, if your XWS wants his/her children to inherit the 401(k) account:

1. BEFORE marriage, the XWS may roll over the contents of his/her 401(k) account to an IRA. Then the IRA owner is free to leave the IRA account to any beneficiary he/she names. With an IRA, the account owner has full discretion to name any beneficiaries he/she chooses. After marriage occurs, a married person may not move 401(k) funds to an IRA without written spousal consent.

2. AFTER marriage, the new spouse may waive his/her right to the 401(k) account by consenting in writing to the owner's choice of another beneficiary. This document, called a Spousal Waiver, must be properly witnessed and filed with the 401(k) plan administrator. If the new spouse declines to sign a Spousal Waiver, then nothing can prevent the new spouse from inheriting the 401(k).


BS: me
XWH: Dead to me, after spending half our lives together
2 teenagers
"I get it now; I didn't get it then. That life is about losing and about doing it as gracefully as possible... and enjoying everything in between."-Mia Farrow

Posts: 396 | Registered: Mar 2011
nekorb
♀ Member
Member # 40306
Default  Posted: 6:41 AM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

So - the point of this is to make sure the kids inherit the 401k, correct? As the BS, if he is getting remarried I presumably already have my "share" of the 401k through the division of marital assets. Correct?


Me: BS 44; Him: WH 47 aka CAT- colossal asshat; Married 22 years
D-day: July 17, 2013, with TT to follow
D filed July 16, 2014, 363 days later than I should have
Psalms 27:14
Wait for The Lord; be strong and take heart. Wait for the Lord.

Posts: 1838 | Registered: Aug 2013
josie11
♀ Member
Member # 31648
Default  Posted: 10:49 AM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

So - the point of this is to make sure the kids inherit the 401k, correct?

Yes, exactly. My children lost their inheritance on their father's wedding day - and he didn't even mean it to happen. He didn't know the law. Our children's loss of their birthright amounts to over $1 million each. By the time their inheritance becomes a reality, the value of those 401(k) accounts may be much greater.

As the BS, if he is getting remarried I presumably already have my "share" of the 401k through the division of marital assets. Correct?

Property division may or may not happen that way. For example, in my case as the BS, I accepted other marital assets in the property division, and my XWS kept his 401(k) accounts intact. They now comprise the bulk of his estate, almost none of which will go to his children when he dies, unless his new wife predeceases him.

So I am posting this as a warning to others in a similar situation who may not be familiar with ERISA law regarding 401(k) accounts and their automatic inheritance by a surviving spouse.

[This message edited by josie11 at 10:54 AM, May 2nd (Friday)]


BS: me
XWH: Dead to me, after spending half our lives together
2 teenagers
"I get it now; I didn't get it then. That life is about losing and about doing it as gracefully as possible... and enjoying everything in between."-Mia Farrow

Posts: 396 | Registered: Mar 2011
Grace and Flowers
♀ Member
Member # 34431
Default  Posted: 11:39 AM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

I'm confused.

Following my divorce, we had a QDRO drawn up, and I got 1/2 of his 401k at the time of divorce. I rolled it over into my own 401k. Also did the same with a small pension. So those monies are all mine now, to do with as I please.

I guess you are talking about people who divorced, but didn't split the 401k(s)?


I'm Happy, not Sad!

Posts: 1177 | Registered: Jan 2012 | From: US
one2ndchance
♀ Member
Member # 14759
Default  Posted: 12:53 PM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

Thanks for this important information.


Me: BW 60
Him: STBXWH 62
Married: 25 years
DDay1: 2/2002; DDay2: 6/2012
Gave him his second chance and he blew it.
Divorce final: 9/2014

Posts: 485 | Registered: May 2007 | From: California
Nature_Girl
♀ Member
Member # 32554
Default  Posted: 12:55 PM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

This is good information. It comes too late for me (divorce final, QDRO in process), but hopefully there are others here who will heed your experience.

I am furious for your children. I pray they will be able to receive their rightful inheritance one day.


Me = BS (Stay-at-home-mom)
Him = EX-d out (abusive troglodyte NPD SA)
3 tween-aged kids
Together 20 years
D-Day: Memorial Weekend 2011
2013 - I DIVORCED HIM, I'M FREE!
http://www.youtube.com/watch?v=RBOJpIwF47Y

Posts: 9856 | Registered: Jun 2011 | From: USA
7yrsflushed
♂ Member
Member # 32258
Default  Posted: 1:00 PM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

Josie is correct. But since we can't control our ex spouses...

we had a QDRO drawn up, and I got 1/2 of his 401k at the time of divorce. I rolled it over into my own 401k. Also did the same with a small pension. So those monies are all mine now, to do with as I please.

^^^This is how you protect yourself and at least get some of those funds for your children. My stbxww waived her right to my 401k in the PSA. Her choice, which I was NOT going to argue with. Unless she magically becomes responsible she will be living from check to check forever so I will be providing the bulk if not all of my children's inheritance. I don't have to worry about a spouse getting it because I have no intentions of ever getting married again.


D-day 5/24/11
BH = Me
2 children
The first true sense of calm I felt in YEARS was when I filed for D...
Divorced 9/2/14 and loving life!

Posts: 1914 | Registered: May 2011 | From: VA
HeartStings
♀ Member
Member # 38017
Default  Posted: 2:32 PM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

Just curious....did his new wife decline to sign the waiver?

If so, she's a real piece of work, eh? I hope he has a pre-nup!


Posts: 117 | Registered: Jan 2013 | From: New England
josie11
♀ Member
Member # 31648
Default  Posted: 3:17 PM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

I'm confused.

Following my divorce, we had a QDRO drawn up, and I got 1/2 of his 401k at the time of divorce. I rolled it over into my own 401k. Also did the same with a small pension. So those monies are all mine now, to do with as I please.

I guess you are talking about people who divorced, but didn't split the 401k(s)?

I'm talking about what happens to the 401(k) funds that remain under your ex-spouse's control, in the event that he remarries. If he dies, his surviving spouse automatically inherits the entire 401(k) account, regardless of what he puts in his will or who he names as his beneficiaries.

Maybe he would want his widow to inherit all his 401(k) assets, and maybe he wouldn't want that. But if he happens to want his children to inherit those funds, that won't happen unless he takes steps to roll the funds over into an IRA before remarriage or has his spouse sign a Spousal Waiver to give up her automatic claims to those funds.

The same goes for the 401(k) funds that are now in your name. If you were to remarry and then were unfortunately run over by a bus the next day or next week or next year, all the funds would automatically go to your surviving spouse, not your children, no matter what your will said or who you named as the beneficiary.

I just think that fact is important for people to understand.


BS: me
XWH: Dead to me, after spending half our lives together
2 teenagers
"I get it now; I didn't get it then. That life is about losing and about doing it as gracefully as possible... and enjoying everything in between."-Mia Farrow

Posts: 396 | Registered: Mar 2011
Nature_Girl
♀ Member
Member # 32554
Default  Posted: 3:27 PM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

Just one of the many, far-too-many, important things for us to learn while we're in the middle of a disaster. GAH!


Me = BS (Stay-at-home-mom)
Him = EX-d out (abusive troglodyte NPD SA)
3 tween-aged kids
Together 20 years
D-Day: Memorial Weekend 2011
2013 - I DIVORCED HIM, I'M FREE!
http://www.youtube.com/watch?v=RBOJpIwF47Y

Posts: 9856 | Registered: Jun 2011 | From: USA
josie11
♀ Member
Member # 31648
Default  Posted: 3:27 PM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

Just curious....did his new wife decline to sign the waiver?

If so, she's a real piece of work, eh? I hope he has a pre-nup!

No, she did not sign a Spousal Waiver of her right to those funds, and she never will. She's been married several times before, very profitably, and she knows what she's doing. There's no pre-nup or anything, either. They just went down to the courthouse one day about a month after our divorce was final and did the deed, those madcap kids, without telling anyone.

So he disinherited his children. Here's a similar story of how ERISA trumps wills or intended beneficiaries:

http://www.szarkafinancial.com/files/23841/Szarka-Newsletter-3rdQtr2011-Alex.pdf

(link edited because original link required registration)

[This message edited by josie11 at 3:46 PM, May 2nd (Friday)]


BS: me
XWH: Dead to me, after spending half our lives together
2 teenagers
"I get it now; I didn't get it then. That life is about losing and about doing it as gracefully as possible... and enjoying everything in between."-Mia Farrow

Posts: 396 | Registered: Mar 2011
josie11
♀ Member
Member # 31648
Default  Posted: 4:28 PM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

^^^This is how you protect yourself and at least get some of those funds for your children. My stbxww waived her right to my 401k in the PSA. Her choice, which I was NOT going to argue with. Unless she magically becomes responsible she will be living from check to check forever so I will be providing the bulk if not all of my children's inheritance.

Good for you! Be sure to check the beneficiary forms for all your accounts in case one of them still contains your ex-wife's name. If she were named as a beneficary, she might inherit all or part of the funds, regardless of your intentions.

I don't have to worry about a spouse getting it because I have no intentions of ever getting married again.

I feel exactly the same way! But just in case someone special comes along and is a game-changer, it's good to know how to protect your children's inheritance in that event.


BS: me
XWH: Dead to me, after spending half our lives together
2 teenagers
"I get it now; I didn't get it then. That life is about losing and about doing it as gracefully as possible... and enjoying everything in between."-Mia Farrow

Posts: 396 | Registered: Mar 2011
KLinNoCA
♀ Member
Member # 22195
Default  Posted: 10:00 PM, May 2nd (Friday), 2014View ProfileEdit MessagePrivate MessageHomepage

Aren't you protected if you have QDRO and a court order that states you, as the ex-wife, have survivor benefit rights on the 401K?


BS (me):45
STBXH:53
M 13 years, together 15yrs
4 kids (2 mine, 2 ours)
1st D-day:July 17, 2008
2nd D-Day: Nov. 20, 2008
MOW, as well as a former BFF OW--I was in an "open marriage", I just never got the memo.
Divorced his ass!!

Posts: 1200 | Registered: Dec 2008
josie11
♀ Member
Member # 31648
Default  Posted: 8:26 AM, May 3rd (Saturday), 2014View ProfileEdit MessagePrivate MessageHomepage

Aren't you protected if you have QDRO and a court order that states you, as the ex-wife, have survivor benefit rights on the 401K?

That may protect your share, but things can sometimes go wrong. See this article for an example:

http://www.lifemanagement.com/fsa13.2.1068/

At any rate, I was speaking of what happens to the share retained by the original 401(k) account owner after the divorce.

In many cases, the divorced parent designates his/her children as the beneficiaries and expects that they will inherit the account. My point is that a parent's beneficiary designation is worthless if he/she has remarried. Most parents would want their children to inherit something of their 401(k), but that won't happen if the parent has remarried, without the special precautions that I outlined above.

[This message edited by josie11 at 1:09 PM, May 3rd (Saturday)]


BS: me
XWH: Dead to me, after spending half our lives together
2 teenagers
"I get it now; I didn't get it then. That life is about losing and about doing it as gracefully as possible... and enjoying everything in between."-Mia Farrow

Posts: 396 | Registered: Mar 2011
DepressedDaddy
♂ Member
Member # 41521
Default  Posted: 9:51 AM, May 3rd (Saturday), 2014View ProfileEdit MessagePrivate MessageHomepage

A couple quick questions. First off, this is great information and something I had no idea about.

1. If the new spouse was willing to sign a waiver, is that a waiver for that account completely, even monies deposited post marriage finalization? Or, is the waiver only valid for pre-marital monies? Would a pre-nup be valid for 401k's?

2. So you say IRAs do not have the same restrictions, but what about those of us that work for non-profits and have our funds deposited into 403b accounts? Do these same rules apply? What about mutual funds/stocks/etc?

Thanks for the valuable info!


Since D I have become DDaddy 2.0 - or better known as DevotedDaddy

“Optimism is a strategy for making a better future. Because unless you believe that the future can be better, you are unlikely to step up and take responsibility for making it so."


Posts: 820 | Registered: Dec 2013
josie11
♀ Member
Member # 31648
Default  Posted: 12:42 PM, May 3rd (Saturday), 2014View ProfileEdit MessagePrivate MessageHomepage

A couple quick questions. First off, this is great information and something I had no idea about.

1. If the new spouse was willing to sign a waiver, is that a waiver for that account completely, even monies deposited post marriage finalization? Or, is the waiver only valid for pre-marital monies?

That is a very good question. From what I have read, the waiver would give up the new spouse's right to inherit the entire account, minus any portion that may have been set aside by QDRO for an ex-spouse.

I'm not an accountant or an attorney, just a divorced parent, so please check with your plan administrator. The Spousal Waiver must be properly witnessed and filed with the plan administrator, at any rate, so you'll want to make sure you're preparing the document correctly.

Would a pre-nup be valid for 401k's

You would think so, but a decision last year by the U.S. Court of Appeals for the Eight Circuit said otherwise.

"In a recent decision, the Court ruled that a post-nuptial agreement in which each party expressed “irrevocable consent” to a change of beneficiary of the other’s retirement plan did not, in fact, constitute a waiver of the spousal right to benefit from such plans. (The husband had made his parents the beneficiaries of his retirement plan; in divorcing, the wife refused to waive her spousal rights. The Court ruled in her favor.)"

The Court's reasoning applies to both pre- and post-nups. For more details, see this Forbes article:

http://www.forbes.com/sites/jefflanders/2013/08/14/court-ruling-postnup-does-not-waive-spousal-rights-to-401k/


2. So you say IRAs do not have the same restrictions, but what about those of us that work for non-profits and have our funds deposited into 403b accounts? Do these same rules apply? What about mutual funds/stocks/etc?

You can name any beneficiary you want for an IRA or for an ordinary investment account (which may contain stocks, bonds, mutual funds, etc.).

As for 403(b) accounts, I did some quick research and learned that most 403(b) plans sponsored by nonprofits are subject to ERISA (Employee Retirement Income Security Act of 1974). However, some plans with limited employer involvement are exempt. You would have to verify ERISA status with your plan administrator. Also, according to a document that I found on the tiaa-cref.org website, government and church 403(b) plans have non-ERISA status.

http://www1.tiaa-cref.org/plansponsors/resources/compliance/403b/details/plan-documents/non_erisa_plans.html

Thanks for the valuable info!

You are welcome. I'm hoping that others can benefit from my experience.

[This message edited by josie11 at 1:13 PM, May 3rd (Saturday)]


BS: me
XWH: Dead to me, after spending half our lives together
2 teenagers
"I get it now; I didn't get it then. That life is about losing and about doing it as gracefully as possible... and enjoying everything in between."-Mia Farrow

Posts: 396 | Registered: Mar 2011
KLinNoCA
♀ Member
Member # 22195
Default  Posted: 7:01 PM, May 4th (Sunday), 2014View ProfileEdit MessagePrivate MessageHomepage

That may protect your share, but things can sometimes go wrong. See this article for an example:

http://www.lifemanagement.com/fsa13.2.1068/

I'm in a community property state and my attorney joined CalPERS into my divorce even though the QDRO hasn't been drawn up yet but ordered-- Our divorce was final on 12/31/2013 and in the decree it states that I am to get survivor benefits as well as my share of his 401K plan. I certainly hope this doesn't come back to bite me in the ass.....


BS (me):45
STBXH:53
M 13 years, together 15yrs
4 kids (2 mine, 2 ours)
1st D-day:July 17, 2008
2nd D-Day: Nov. 20, 2008
MOW, as well as a former BFF OW--I was in an "open marriage", I just never got the memo.
Divorced his ass!!

Posts: 1200 | Registered: Dec 2008
DepressedDaddy
♂ Member
Member # 41521
Default  Posted: 7:44 PM, May 4th (Sunday), 2014View ProfileEdit MessagePrivate MessageHomepage

Thanks Josie...That's very valuable info!


Since D I have become DDaddy 2.0 - or better known as DevotedDaddy

“Optimism is a strategy for making a better future. Because unless you believe that the future can be better, you are unlikely to step up and take responsibility for making it so."


Posts: 820 | Registered: Dec 2013
Topic Posts: 18

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