Cover Image for What You Must Know About Your Right to Your Spouse’s Retirement Benefits

What You Must Know About Your Right to Your Spouse’s Retirement Benefits

Being part of a blended family comes with its unique set of challenges, from navigating holiday schedules to planning for the future of your loved ones. While you may have considered what will happen to your assets after you're gone, it's essential to understand how the law impacts retirement benefits, especially in blended families.

ERISA Regulations and 401(k) Distributions

If you've remarried, updating beneficiary designations on retirement accounts is crucial. However, even if you designate your children as beneficiaries, federal regulations, such as the Employee Retirement Income Security Act (ERISA), ensure that your surviving spouse is entitled to a portion of your employer-sponsored plan. This means that, by default, your spouse will receive 50% of the account's value, regardless of your beneficiary designation.

Exceptions to this rule include your spouse signing a Spousal Waiver or designating a Trust as the beneficiary. These options allow for more flexibility in distributing retirement assets according to your wishes.

Differences with IRAs

In contrast to employer-sponsored plans, Individual Retirement Accounts (IRAs) are governed by state law rather than ERISA. This means that spouses do not automatically inherit IRAs. Rolling a 401(k) into an IRA provides the flexibility to designate beneficiaries without spousal consent.

However, if you wish to ensure your spouse receives a portion of your retirement savings, consider designating them as a beneficiary or directing the payout to a Trust. Trusts offer control over distribution and allow for updates without modifying beneficiary designations.

Primacy of Beneficiary Designations

It's vital to understand that beneficiary designations override provisions in your Will. Regardless of what your Will states, assets like retirement accounts will pass to the designated beneficiary. Failure to update beneficiary designations can lead to unintended consequences, such as former spouses inheriting assets.

Working with an estate planning attorney ensures proper beneficiary designations, aligning with your wishes and avoiding conflicts in asset distribution. By proactively addressing these matters, you can safeguard your family's financial future and ensure your assets benefit those you intend.

Work With An Attorney Who Makes Sure All Your Assets Will Be Passed On How You Want Them To

Understanding how the law affects different types of assets is essential to creating an estate plan. But there’s more to it than just having a lawyer – you need an attorney who takes the time to really understand your family and your assets so they can design a custom plan that achieves your goals for your assets and your legacy. 

That’s why we help our clients create an inventory of all of their assets to ensure that every asset they hold is accounted for and passed on to their loved ones exactly as they want it to.

Learn more about how we serve our clients differently than most lawyers; schedule a complimentary call with us. We’d be honored to share how our unique process can help your family.

Additional Resources

Resource Center

Why Estate Planning is Crucial for Real Estate Investors

Estate planning is vital for real estate investors to protect assets, ensure smooth transfer, minimize taxes, and plan for business continuity. It safeguards investments and secures legacies for heirs.

Read More
Resource Center

Unraveling the Mystery: Top 4 Reasons Why People Neglect Their Estate Plans

Estate planning is a crucial aspect of #adulting that often gets pushed to the back burner. Despite its significance, many individuals delay or altogether avoid addressing their estate plans, leaving their financial affairs and legacy vulnerable.

Read More
Resource Center

Maximize Your Tax Refund: Choose Estate Planning

Tax season often brings a sense of relief and excitement, especially for those anticipating a tax refund. While the temptation to book a vacation or go shopping may be strong, there's another option that could offer long-term benefits: estate planning.

Read More