When choosing a beneficiary for a retirement plan, it’s important to understand how your spouse will be treated under the plan. The rules are different for 401(k)s and IRAs.
With a 401(k) plan, a surviving spouse is the automatic beneficiary of the plan. If you want to name someone other than your spouse as a beneficiary, your spouse must agree to this in writing.
There are some exceptions; for example, the rule might not apply if you and your spouse have been married for a very short time. But in general, it’s a strict rule. In fact, even if your spouse signed a prenuptial agreement saying that he or she has no right to your 401(k), that might not be good enough, because he or she wasn’t your “spouse” at the time of the signing.
On the other hand, this rule is not true for an IRA. Surviving spouses are not automatic IRA beneficiaries.
In a recent case, a husband rolled his 401(k) into an IRA after he retired. He named his children as the IRA’s beneficiaries. After he died, his wife claimed that she was entitled to the account funds as his surviving spouse. She argued that because her husband had rolled his 401(k) into the IRA, she should receive the same protections that the 401(k) had given her.
But a federal appeals court in California disagreed, deciding that the IRA rules applied even if the funds originated in a 401(k).
In general, whether you have a 401(k) or an IRA, it is important to regularly check your beneficiary designations to make sure they are current and fit with the rest of your estate plan.
Brian Demidovich primarily focuses in Raleigh family mediation and the other Raleigh lawyers at The Law Corner can help you with a fast and simple no-fault or uncontested divorce. However, we are also there to represent you in the most difficult divorce situations too. With experience in and out of the courtroom, we can help you with your divorce — no matter what.
As you may know, in North Carolina, almost all divorce cases require you to live separately for a total of one year. For more information, The Law Corner divorce attorneys in Raleigh can help explain the divorce process to you and help you with other divorce related issues, to include, but not limited to, the following:
Qualified Domestic Relations Order (QDRO)
The Law Corner Attorneys help people all over Wake County to include the following areas: Knightdale, Wake Forest, Raleigh, Morrisville, Apex, Wendell, Zebulon, New Hope, Cary, Rolesville, Fuquay-Varina, Holly Springs, and Garner.