How To Avoid Recently Remarried IRA Beneficiary Woes

If you’ve recently remarried you have to be really smart about your IRA beneficiary choices. First off, you might feel pulled in different directions. Of course you want to show the financial love to your new muffin cake. But if you have children from a previous marriage, you want to show up for them too. These are relational issues which I’m not going to get into right now. But I do want to talk about the legal considerations.

If you decide to name your new spouse as the primary beneficiary and cut out the kids, it’s no problem from a legal standpoint. All you have to do is complete a retirement account beneficiary form and you’re done. But if you designate someone other than your current spouse, you must realize that there are legal restrictions and requirements. And if you ignore these retirement account beneficiary laws, you might just open up a huge can of very ugly worms. We need to avoid that. Let’s get to work.

A Little Background On Retirement Plan Designations

Whenever you open a retirement account you’ll be asked to name a beneficiary and quite possibly a contingent beneficiary. These are the people who inherit that specific account when you die. Even if you have a will or a trust, it’s important to understand that the beneficiary form trumps those estate planning documents. The people who are named as beneficiaries on each account are the people who get the money when you die. Full stop.

The Rules You Need To Know

If you are married and name someone other than your spouse as the primary beneficiary, the spouse has to sign off on it by law. If they do not sign off and you name a non-spouse primary beneficiary, it may not be legally binding. Oops.

Several years ago, Rachael divorced her schlep husband. After they separated their assets, she opened up her own IRA and named her children as beneficiaries on that account. Since she was single at the time that was fine.

But Rachael recently remarried and she wanted to change her contingent beneficiaries. In order to do that, Rachael will need her new husband to sign off on the beneficiary designation form since he isn’t the primary beneficiary. He may or may not agree to sign off. He may want Rachael to name him as the primary beneficiary and refuse to sign the form if Rachael doesn’t acquiesce. Awkward.

The good news is that Rachael doesn’t need to get her hubby’s OK to leave things as they are. Her husband only has veto power if she wants to make any beneficiary changes.

What You Should Do

First, if you are contemplating getting remarried, speak with a qualified attorney before doing so. You want to make sure you understand all your property and beneficiary rights and you want to protect yourself and your kids. If you’ve already tied the knot, it’s still smart to consult with a lawyer. It could save you a lot of money and disagreements. It also might prolong the marriage.

If you decide against consulting with an attorney, review your beneficiary designations before you get married. Make sure you’ve got the right beneficiaries and contingent beneficiaries named. This way you’ll reduce the chances of having to change them in the near future. And if you don’t need to change anything, you won’t need your spouse to sign off on anything. Sweet.

Beneficiary designations are important because they direct what happens to all you’ve worked for after you are gone. If you have recently remarried or are about to get married, take a few precautions now to make sure you protect yourself and your heirs – and head off potential blow ups down the road.