Second Spouse's Rights to 401k and IRA Assets
My question involves estate proceedings in the state of: California
I wanted to know what are the rights of a second wife to assets in a 401K and TRAD IRA account. I found a lot of information on the internet regarding second wife due to divorce. What is my wife passed away and now I am going to get remarried?
I am 61 and my wife has been deceased for over 10 Years. I am now engaged and want to make sure my kids inherit my 401K assets. I am trying to avoid having to do a prenuptial if possible. I have read some information online that if I roll the assets over to a TRAD IRA and put my kids on as beneficiaries that would solve the issue since the TRAD IRA are not subject to ERISA rules. Any information is greatly appreciated.
Re: Second Spouse Rights to 401k and IRA Assets
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int3ldata
I am 61 and my wife has been deceased for over 10 Years. I am now engaged and want to make sure my kids inherit my 401K assets. I am trying to avoid having to do a prenuptial if possible. I have read some information online that if I roll the assets over to a TRAD IRA and put my kids on as beneficiaries that would solve the issue since the TRAD IRA are not subject to ERISA rules. Any information is greatly appreciated.
Your situation with respect to your new spouse will be treated just like that of someone who at death has only ever been married the one time. An account established under the rules of Internal Revenue Code (IRC) section 401(k) are employer sponsored retirement benefits and subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Under that Act, your spouse, should she survive you, would by default be the beneficiary of your § 401(k) account. There are ways around that, including having your spouse sign a consent that waives being the beneficiary so that you may pass the account on to your kids. (Note that while it is common to see these plans referred to as section 401K or section 401k plans, the proper way to refer to them is as section 401(k) plans since they are plans established under IRC § 401(k).)
An individual retirement account (IRA) is something you set up yourself rather than through your employer and thus IRAs are not subject to the ERISA rules. Nor does the tax law require that the surviving spouse be the beneficiary of an IRA. Thus, you may simply designate your kids as the pay on death (POD) beneficiary of your IRA. Both traditional (which what I assume you meant by TRAD) and Roth IRAs work that way.
Re: Second Spouse's Rights to 401k and IRA Assets
Thank you for the information. One additional questions would be for rolling the 401(K) into a traditional IRA. You had stated the tax law does not required a spouse be beneficiary ans I could just simply name my kids. Does this hold true in the state california? Through my brokerage firm I am required to have a spousal waiver of my spouse is not the primary beneficiary. This make it seem like she would be automatically entitled to inherit my IRA.
If this is true, then what would happen if I name the kids as sole beneficiaries of my IRA before getting married. Then once I am married can she still make claim to the IRA upon my death and cut the kids out.
Re: Second Spouse's Rights to 401k and IRA Assets
Quote:
Quoting
int3ldata
Thank you for the information. One additional questions would be for rolling the 401(K) into a traditional IRA. You had stated the tax law does not required a spouse be beneficiary ans I could just simply name my kids. Does this hold true in the state california? Through my brokerage firm I am required to have a spousal waiver of my spouse is not the primary beneficiary. This make it seem like she would be automatically entitled to inherit my IRA.
That is likely because of concerns about community property in California. I do not practice in CA (or any community property state) and can’t really tell you exactly how to navigate that issue. You are probably going to want to get her consent for this if for no other reason than to help ensure that there isn’t a big battle between her and your kids after you die. It sounds like you are not willing to approach her to get a pre nup or consent, which makes me think you believe she would not be on board with what you want to do. If you try to hide it from her that has the potential to blow up on you (or your kids) later.