Spousal rights to 401(k) account

[Guest Cbanarer]

I have a 74 yr old male actively participating in a 401(k) plan. He is widowed (about 3 years) and has two children in their mid 40s, who are named as beneficiaries on his 401(k). So far, all money accumulated in the 401(k) has been earned while he was unmarried; however, he will be getting married in late November.

His fiance is also 74 yrs old and widowed, with 3 children also in their 40s.

Since he is still working, he will continue contributing to the 401(k) after marriage. Hence his account at retirement will consist partly of monies earned while he was unmarried, and partly of monies earned while he was married.

At retirement (when he begins minimum distribution) what rights will his future wife, and his children have, respectively, in his 401(k) account. Should he change his beneficiary designation? Does he need some kind of a spousal waiver? Help is greatly appreciated.

[Alan Simpson]

If the participant does not wish the retirement plan balance to go to his new wife on his death he should complete a new beneficiary designation form, signed by the new wife naming who he wants as beneficiary of the account. I would ensure that this is done on a form acceptable to the plan administrator and/or plan trustee.

If the new wife is not agreeable to naming someone other than her as the primary beneficiary perhaps the participant could set up a trust, with named beneficiaries, allowing the money to go into the trust to be used for her benefit while she is alive and distributed to his sons at her death and termination of the trust.

Another option is to name multiple primary beneficiaries with the new wife signing the beneficiary form agreeing to the beneficiary election. (ie. 20% to wife, 80% to his sons).

[Larry M]

1.make sure any document the new wife signs with respect to the plan is after they are married - a pre-nuptial agreement will not be binding

2.if the plan allows in service distributions, then let him make a trust to trust distribution of the current account to his own ira. Later, when the new wife signs the appropriate agreement, he can transfer teh money back into the 401(k) as a rollover account.

[LCARUSI]

When your client gets married, any prior beneficiary designation in the Plan becomes invalid and the spouse becomes the beneficiary.

If your client wishes to name someone other than the new spouse as beneficiary, the new spouse must consent in writing to the designation of someone else. Spousal consent is irrevocable.

Once your client begins minimum distributions, nothing really changes. The beneficiary designation - the spouse, or someone else (with spousal consent) - will continue to apply to whatever is left in the Plan.

[Guest Cbanarer]

Thank you all for your responses - they were very helpful. What about my client's IRA? He presently has about $120,000 in the IRA with son and daughter as beneficiary.

Will that also change automatically when he gets married? Should he do anything to maintain the kids as bene on the IRA?

[LCARUSI]

The designation of the children will not change after the marriage. Your client can change the designation at anytime to name anyone and can do so without spousal consent.