The fate of your 401(k) when you die

Anyone who is working and has a 401(k) likely worries about it from time to time. They might check to see how it’s doing and wonder if they should be putting a bigger percentage of their paycheck in every month.

But you also need to think about the fate of your 401(k) when you die. It’s not always up to you, especially if you remarry after your first spouse dies or if you get divorced.

Federal law mandates that a married 401(k) account holder’s retirement plan goes to the person’s spouse if he or she dies. No ifs, ands or buts.

The law stems from a 1984 Congressional bill signed into law by President Ronald Reagan. He did it so that married couples wouldn’t be able to sign away survivor benefits for one another in the event there were problems in the relationship. Despite the benefits the law provides, it can cause headaches for some families. Let’s say a man remarried after his first wife died. After her death, he had named his three adult children as beneficiaries. He filled out all the paperwork and he thought had everything in order.

But after the man passed, his new wife successfully sued, claiming she was entitled to the money in his 401(k). The courts would side with her because of the rules outlined in Reagan’s federal law. The decision came despite the fact that the children were named the beneficiaries.

The law is clear when it comes to 401(k) retirement plan assets if a married participant dies. The spouse gets the entire account, unless he or she has specifically waived the right in writing. If an employee opts to take a retirement plan payout as an annuity, he or she must choose a plan that will continue lifetime payments to the surviving spouse equal to at least half of the original benefit amount.

If you plan to remarry, look at your estate plan and determine if it needs updating. An experienced Florida estate planning attorney can help you modify your plan as necessary and explain your options.

Our experienced and trusted estate planning attorneys have been serving Treasure Coast families for decades, and Michael Fowler is one of only nine attorneys in the state of Florida who is double board-certified in wills trusts and estates and in elder law.  Contact us for your initial consultation at one of our conveniently located offices in Fort Pierce, Stuart, Port St. Lucie, Vero Beach, and Okeechobee.