Under ERISA, Beneficiaries May Not Inherit

[latexman]

You Could Accidentally Disinherit Your Children Unless You Follow This Obscure Rule

It seems the new, young spouse was not asked to sign a spousal waiver, so the intended beneficiaries/children of the deceased did not inherit the monies in the deceased's 401(k) plan as specified.

Oopsie!

I did not know this.

 

[Montecfo]

I do not think that is a new rule. But seems there could be a cause of action against the administrator for not following the plan (which requires those sigs).

 

[MRG]

I do not think that is a new rule. But seems their could be a cause of action against the administrator for not following the plan (which requires those signs).

+1
This isn't new it's how it works. Sounds like a great example of people not understanding the process. Too bad, perhaps they should have asked questions and followed advice.

 

[Montecfo]

Of course the purpose of such rules is to protect dependent spouses, a good objective.

 

[latexman]

Of course the purpose of such rules is to protect dependent spouses, a good objective.

Agreed, but in the case cited (husband died two weeks after marriage) it sure caught the children by surprise, and makes one wonder, what was the intent of the deceased?

 

[iloveyoga]

Retirement Equity Act of 1983 or 1984?? Old memories.

 

[RobbieB]

Yeah, I knew that when I signed up for my first 401K

 

[Koolau]

Hope I never have to deal with this, but thanks for the info. I guess the whole process could get a bit sticky. Imagine a second marriage and when all the guests are gone from the reception, etc., the couple heads up the stairs. There on the pillow is a waiver for the new 2nd wife to sign - before consummation takes place. Otherwise...

 

[donheff]

I wasn't aware of that. That is a terrible catch 22. It could screw up any marriage new marriage if the 401K owner dies suddenly after the marriage.

 

[Montecfo]

Hope I never have to deal with this, but thanks for the info. I guess the whole process could get a bit sticky. Imagine a second marriage and when all the guests are gone from the reception, etc., the couple heads up the stairs. There on the pillow is a waiver for the new 2nd wife to sign - before consummation takes place. Otherwise...

Well, of course after exercising such leverage, YMMV.

 

[CRLLS]

I do not think that is a new rule. But seems there could be a cause of action against the administrator for not following the plan (which requires those sigs).

I do not agree based on the limited info provided in the article. It is unfortunate turn of events only if, after the new marriage, the deceased intended for the children to continue as the beneficiaries or the new wife. We have no way of knowing. I am not sure there is a "requirement" to notify your HR/Administrator of a new spouse, especially if you are comfortable with the W2 form as on record and the new wife doesn't need health insurance, other benefits etc..... Absent of that, how are the administrators to know they should have his new wife to sign, or not sign the release? Sad situation if he intended for the children to be beneficiaries.

We have a similar situation with MIL's estate right now. The paperwork not being in line with her intentions in both the Will and the Trust. It could go south very quickly and it is likely that the courts would not be able to help. Fortunately, so far, it seems things will work out.

 

[pb4uski]

I was aware of this rule for defined benefit plans in that if I elected a single life benefit then DW would have needed to sign a consent... as it turns out we went with 100% joint life so her consent was not needed.

Not anything that I was aware of... but only applies to company plans... not to IRAs... from the article:

... Also keep in mind, if you’re in a position to roll your company plan over to an IRA before the marriage takes place, this will solve the problem, since IRAs are not subject to this ERISA rule, and you can safely name anybody as your beneficiary that you wish.

Even after marriage if you are in a position to roll your plan over to an IRA, many (but not all) company plan administrators will not require the other spouse’s permission for you to do so, and once it’s moved to the IRA, you will not be subject to this ERISA rule. ...

 

[Big_Hitter]

yep - the onus is on plan participants to keep up with beneficiary designations, not the plan sponsor

 

[iloveyoga]

This rule applies to qualified retirement plans.

 

[latexman]

Hope I never have to deal with this, but thanks for the info. I guess the whole process could get a bit sticky. Imagine a second marriage and when all the guests are gone from the reception, etc., the couple heads up the stairs. There on the pillow is a waiver for the new 2nd wife to sign - before consummation takes place. Otherwise...

Be careful, if 2nd spouse signs BEFORE consummation, are they legally your spouse? They may later claim they weren’t legally the spouse when they signed, and take all the money!