Spousal waiver of death benefit

[Guest Ronald J. Harvey]

Question! Participant in profit sharing plan designates his daughter and brother as co-beneficiaries. Participant later marries and does not update his beneficiary form to include his new spouse as primary beneficiary.

Participant dies pre-retirement while still employed.

Spouse wants to waive 40% of her death benefit to the daughter who is still listed as beneficiary.

Can she do this? If not what other options are available?

Ron Harvey

[QDROphile]

If you have a smart plan document, it will have provisions about disclaimer of benefits under section 2518 of the tax code. Don't coount on it. Without the provisions, the fiduciary has to decide if the disclaimer is permissible without express plan terms.

[mbozek]

Question! Participant in profit sharing plan designates his daughter and brother as co-beneficiaries. Participant later marries and does not update his beneficiary form to include his new spouse as primary beneficiary.

Participant dies pre-retirement while still employed.

Spouse wants to waive 40% of her death benefit to the daughter who is still listed as beneficiary.

Can she do this? If not what other options are available?

Ron Harvey

If ps plan paid normal form of benefits in lump sum then spouse became beneficiary of 100% of benefits and prior beneficiary designation is no longer valid. Spouse cannot disclaim 40% of benefit and direct that it go to only daughter so that daughter would pay income tax. If plan accepts 40% disclaimer of benefits by spouse then 20% would have to be paid daughter and 20% to brother. If plan permits spouse could assign 40% of her benefit to daughter but would have to pay income tax on such transfer plus any 10% penalty tax. Check with attorney for estate to see if spouse could disclaim other property she inherits from participant which can be transferred to daughter without spouse incurring income tax.