Estate Planning and Your 401 (k)
Sometimes, having a Will in place is not enough to properly safeguard your retirement funds — especially for a 401(k). If you are married, your spouse is automatically entitled to every dime in your 401(k) account when you die, regardless of what your Will says or who you designated as the beneficiary of that account. In fact, in most cases, your spouse becomes the sole heir to all of your 401(k) accounts on the date of your marriage.
This rule applies to all 401(k) accounts, including any accounts that you may have established in the past with previous employers — even before you met and married your spouse.
If you want to leave a 401(k) account to another individual, your spouse must file a written statement waiving rights to the account after the marriage has taken place. Specifically, a prenuptial agreement is not a valid waiver of spousal rights since a person cannot give up rights to a 401(k) until they are actually married to the account holder.
In the case of an IRA, the beneficiary form will dictate who inherits the account.
However, it is important to note that, once you are married, you cannot convert a 401(k) into an IRA and name a new beneficiary, effectively disinheriting your spouse, without first obtaining your spouse’s written consent. However, it is perfectly legal to roll a 401(k) account into an IRA before your get married and name beneficiaries.
A further item of concern is the fact that 401(k) and IRA assets would have to be spent down in a long-term care crisis that occurs to either spouse in the absence of an effective asset protection plan.
If you have further questions about how estate planning can help protect your 401(k), Loraine P. Troyer can help you find the answers you need. For more information or to schedule your free consultation, contact Loraine P. Troyer today or call her office directly at 574.534.2347.