Retirement Accounts and Second Marriages

Are you on spouse number 2 or 3 and you have a retirement account?  If so, there are certain things to keep in mind. 

First of all, if you have had your estate planning completed by an estate planner or have a financial advisor/planner, you have most likely addressed this issue. But if you are not certain, be proactive and look into the issue as this area requires special considerations.  Think about these scenarios:

  1. You and your present spouse (not your first spouse) may desire that each of your respective children benefit from the retirement funds you have accumulated. 
  • You may wish to benefit your current spouse from your retirement assets but don’t want to disinherit your children from a prior marriage/relationship.
  • You have a former spouse listed as the beneficiary of your retirement account and have never changed the beneficiary designation to reflect the parties you wish to benefit.

Each of the three scenarios have their own considerations. 

In situation 1 above, there may be federal laws in place that would prevent the distribution of your retirement assets to your children rather than to your current spouse.  Certain types of plans have mandatory distribution clauses that go to the surviving spouse.  If it is your desire to benefit respective spouse’s children, you must seek the guidance from your estate planner or financial advisor/planner as to whether there is a method to carry out this intent.

As for situation 2 above, a trust can most likely accomplish your desire to benefit your spouse for their lifetime with the remaining retirement assets passing to your children upon your spouse’s death.  This is something that your estate planner can draft for you.

Finally, situation 3, in which if the proper steps are not taken before your passing, your former spouse just might inherit.  Some states have laws that disinherit former spouses, but others do not afford that protection.  Since this varies by state, you should make certain that you address this with your estate planner. 

A proactive step you can take is to obtain a designation of beneficiary confirmation from the retirement plan administrator or, if it is an IRA, from the financial institution holding the account.  This will enable you to confirm the beneficiary and determine if any changes are necessary.  If you find that changes are in order and tackle the changes on your own, you should keep a copy of the new beneficiary designation you submit. If you submit the same by USPS, then send it by certified mail, return receipt requested.  Regardless of how the beneficiary designation is submitted, do so in a way that you get a receipt for the submission.  It is also advisable that you ask for confirmation of the change of beneficiary to be placed in your records.

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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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