• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Wealth Pilgrim

No Money Worries. No Matter What.

Neal Frankle featured in
  • Home
  • Life Insurance
  • Investing
    • Build Strong Investment Building Blocks To Avoid Going Broke In Retirement
    • Systematic Mutual Fund and ETF Investing
    • Stock Market Investing Guide
    • Choosing the Right Investment Brokerage Guide
    • How Bonds Work Guide
    • How Banks Really Work Guide
    • Annuities – What You Need To Know Before You Invest
    • A Beginners Guide To Buying Individual Stocks
    • Create A Pool Of Great Mutual Funds and ETFs To Pick From To Secure Your Retirement
    • ETF and Index Fund Investment Guide
  • Earn More
  • Banking
  • Retirement Planning
    • Retirement Guide
  • Reviews
    • Upgrade Personal Loans Review
    • Lending Club Review
    • Prosper Review
    • Ally Invest TradeKing Review
    • CIT Bank Review
    • LegalZoom Review
    • Lexington Law Review
    • Airbnb Host Review
    • Should You Drive For Uber?
  • Tax
  • Courses
    • Raise Your Credit Score So You Can Buy a House – Free Video Course

A 401k Beneficiary Form Mistake You Must Avoid

by Neal Frankle, CFP ®, The article represents the author's opinion. This post may contain affiliate links. Please read our disclosure for more info.

The New Year is only a few days away.   If you haven’t already done so, it’s time to make sure to make the most use of your 401k by making the proper elections.  When you do so, make sure to check your beneficiaries too.

You may not believe it, but the courts can and do set aside your 401k beneficiary elections under certain circumstances. That’s right. 401k beneficiary rules are vastly different from IRA beneficiary rules. I have to admit that this came as a shock to me but it is actually true. Let me share with you a story I read in Investment News Magazine.

Neal’s Notes – While we’re talking about safeguarding your 401k, you might want to learn about making your retirement accounts credit proof.  Just saying….

A married gentleman named his wife beneficiary of his 401k. When she died, he named his 3 children beneficiaries instead. So far so good. But a few years later, this man remarried. He wanted to keep his children as beneficiaries of his 401k but he didn’t get his new wife to sign a waiver. He figured, as would I, that since he named the kids beneficiaries before he remarried, he wouldn’t have to sign any new forms. Wrong.

He died shortly after he remarried. The new wife sued the kids and guess what? She won. That’s right. The courts found that spousal rights to retirement accounts trumps the beneficiary form. I had to read that twice because it was news to me. But it’s important information if you own a 401k.

In most cases, the beneficiary form is more important than wills, trusts, contracts, prenuptial agreements etc. It is probably one of the most important estate planning documents at your disposal. But when it comes to 401k beneficiary forms, spousal rights come first.

What does this mean to you?

First, if you are married and you want anyone other than your spouse to be the 401k beneficiary, make sure your spouse signs a waiver. Keep a copy and make sure your non-spouse beneficiary gets a copy as well.

Next, if you are single now and you’ve named your children or others as beneficiaries, don’t fall asleep. If you remarry, make sure you ask your new spouse to sign a waiver if you want these other people to remain the beneficiaries. You might even want to make it a condition in the prenuptial agreement. If you don’t get your new spouse to sign this waiver, your 401k beneficiary form might become useless if this recent case is a precedent.

The story also demonstrates the danger of keeping your 401k with your old employer. Had this gentleman done a tax free IRA rollover before he remarried, his children would not have encountered this problem. So the final take-away is that there are different rules for IRA’s and 401k’s.

Does it make sense that there are such differences between these two retirement plans? Not to me it doesn’t. But that doesn’t matter. If you have a 401k, keep this rule in mind if you are interested in protecting your non-spouse 401k beneficiary.

Were you aware of this rule? What are you going to do to protect yourself?

Tweet
Pin
Share13

Reader Interactions

User Generated Content (UGC) Disclosure: Please note that the opinions of the commenters are not necessarily the opinions of this site.

Comments

  1. kenny Cheung says

    November 20, 2018 at 9:55 PM

    My brother named me as his beneficiary before he got married. Do I get any money because he got married a few years later and then he died. He was living in Hawaii at the time. His wife has since moved back to China. Can I get the money from his 401k?

    Reply
    • Neal Frankle, CFP ® says

      December 4, 2018 at 2:37 AM

      Who was the beneficiary when he died?

      Reply
  2. Old says

    November 11, 2018 at 10:49 AM

    What is the point of getting a waiver if it can be revoked at ANY time, including in the will of a spouse?

    Its absurd that I cannot direct at least my half of the community property (CA) including a 401k or IRA to whomever I choose. And that federal law does not protect this right.

    Reply
  3. Antonio says

    May 2, 2018 at 9:49 AM

    I am divorsed 28 years and never remarried. I was let go of my job before retirement age and have since rolled over my 401k to a new company. My ex received her portion of that when this occured. Now. I may get married again and i have my 2 children as benificiaries on the new account. If i die prematurly and i am remarried. I was told that my wife can contest it in court and take the money that i intended for my 2 children. What can i do to ensure my kids get at least the portion of what i want to give them or all if i die i amalso only 53 years old and cannot touch my 401k without a penalty. Thank you.

    Reply
    • Neal Frankle, CFP ® says

      May 10, 2018 at 11:33 PM

      This would be a good question for an attorney just to be sure. However, make sure to check your beneficiary forms to insure they are completed correctly.

      Neal

      Reply
  4. Rhonda says

    February 22, 2017 at 1:55 PM

    My husband’s wishes were to leave his 401k to his sons so he added them as beneficiaries at 50% each. He was not made aware that a spousal consent was needed nor did I realize that I would need to sign such a consent. My husband has since passed away and I intend to honor his wishes. May I sign a spousal consent after the fact? Thank you in advance.

    Reply
    • Neal Frankle, CFP ® says

      February 23, 2017 at 12:35 AM

      You should speak w/an attorney and/or CPA but I doubt it. One option is to give them the money which means you would have to pay the tax on all of it at once. Not the best. Another option is to keep it in your name and act as if it’s their money and just do what they ask.

      I am sorry for your loss. This is a bad situation. You should also talk to an attorney about possibly suing the custodian. They should have NEVER accepted that beneficiary document with your signature.

      I wish I had better ideas. Maybe your attorney/CPA can think of something better. Please consult with them.

      Neal

      Reply
  5. April says

    July 3, 2016 at 9:55 AM

    My father no doubt had my brother and I as beneficiaries. He had cancer, retired in October 2015. He had cancer in his brain at that time and many meds. She redid the paper work “I believe”. He was not aware enough to know what he was signing. I have not heard anything from his 401k/retirement. Is it legal to do what she did? How do I find out if my brother and I were taken off?

    Reply
    • Neal Frankle, CFP ® says

      July 3, 2016 at 9:14 PM

      This is sadly a question only an attorney can help you with. I wish I could help more.

      Reply
  6. thel says

    January 4, 2014 at 4:22 PM

    I don’t think spousal rights to retirement accounts nor trusts trumps the IRA beneficiary forms, otherwise my lawyer would have advised me to go after the other half of my deceased husband’s IRA which went to my brother-in-law.

    Reply
    • Neal Frankle, CFP ® says

      January 5, 2014 at 1:22 AM

      I think it depends. Spousal rights CAN trump the beneficiary form if the spouse didn’t sign off on naming another beneficiary. Did you sign off on allowing your husband to name his brother for 50%?

      Reply
  7. bob says

    October 9, 2012 at 4:03 PM

    I f you are getting divorced most states require a division of 401k assets. Plan ahead.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Are You Human? * Time limit is exhausted. Please reload CAPTCHA.

Primary Sidebar

Who is Neal Frankle

Neal Frankle

I'm a CERTIFIED FINANCIAL PLANNER™ Professional with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim.
Read More »

Stay Connected

Facebook Twitter YouTube RSS
We are on YouTube
Retirement financial education for people age 55+ seeking to retire well and for those retired seeking to enjoy a better retirement.  We discuss retirement planning, retirement investments, taxes in retirement, retirement spending, IRA and 401k distributions and we will personally answer questions that you pose in the video comments.

While so much financial information is about preparing for retirement, what about managing your finances in your retirement years? That's exactly what we cover at Retirement Crusaders.

Neal Frankle is a retired registered investment adviser. Larry Klein is a retired financial advisor and retired CPA. They have 70 years of financial advising experience to share so that you have your best retirement years.

Retirement financial education for people age 55+ seeking to retire well and for those retired seeking to enjoy a better retirement. We discuss retirement planning, retirement investments, taxes in retirement, retirement spending, IRA and 401k distributions and we will personally answer questions that you pose in the video comments.

While so much financial information is about preparing for retirement, what about managing your finances in your retirement years? That's exactly what we cover at Retirement Crusaders.

Neal Frankle is a retired registered investment adviser. Larry Klein is a retired financial advisor and retired CPA. They have 70 years of financial advising experience to share so that you have your best retirement years.

YouTube Video UCoU0buhwVplzXrsyf342nOg

Retirement Crusaders

June 10, 2022 1:19 PM

Subscribe
This error message is only visible to WordPress admins

Error 403: Requests from referer are blocked..

Domain code: global
Reason code: forbidden

More Categories

Career Development
College Funding
Credit Cards
Credit Score Fixes
Money and Marriage
Debt Relief
Estate Protection
Property Investment Loans
Small Business Strategies
Spend Less Money
Retirement financial education for people age 55+ seeking to retire well and for those retired seeking to enjoy a better retirement.  We discuss retirement planning, retirement investments, taxes in retirement, retirement spending, IRA and 401k distributions and we will personally answer questions that you pose in the video comments.

While so much financial information is about preparing for retirement, what about managing your finances in your retirement years? That's exactly what we cover at Retirement Crusaders.

Neal Frankle is a retired registered investment adviser. Larry Klein is a retired financial advisor and retired CPA. They have 70 years of financial advising experience to share so that you have your best retirement years.

Retirement financial education for people age 55+ seeking to retire well and for those retired seeking to enjoy a better retirement. We discuss retirement planning, retirement investments, taxes in retirement, retirement spending, IRA and 401k distributions and we will personally answer questions that you pose in the video comments.

While so much financial information is about preparing for retirement, what about managing your finances in your retirement years? That's exactly what we cover at Retirement Crusaders.

Neal Frankle is a retired registered investment adviser. Larry Klein is a retired financial advisor and retired CPA. They have 70 years of financial advising experience to share so that you have your best retirement years.

YouTube Video UCoU0buhwVplzXrsyf342nOg

Retirement Crusaders

June 10, 2022 1:19 PM

Subscribe
This error message is only visible to WordPress admins

Error 403: Requests from referer are blocked..

Domain code: global
Reason code: forbidden

Disclaimer

Wealth Pilgrim is not responsible for and does not endorse any advertising, products or resource available from advertisements on this website. Wealth Pilgrim receives compensation from Google for advertising space on this website, but does not control the advertising selection or content. Please do the appropriate research before participating in any third party offers. The information contained in WealthPilgrim.com is for general information or entertainment purposes only and does not constitute professional financial advice. Please contact an independent financial professional for advice regarding your specific situation. Wealth Pilgrim does not provide investment advisory services and is not a registered investment adviser. Neal may provide advisory services through Wealth Resources Group, a registered investment adviser. Wealth Pilgrim and Wealth Resources Group are affiliated companies. In accordance with FTC guidelines, we state that we have a financial relationship with some of the companies mentioned in this website. This may include receiving payments,access to free products and services for product and service reviews and giveaways. Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.


About · Contact · Disclaimer & Privacy policy

Copyright © Wealth Pilgrim 2023 All Rights Reserved