Q: For eight years after we married, I was the beneficiary on my husband's 401(k) account, which he opened two years prior to our marriage. But when he retired, he transferred the 401(k) into an IRA and a Roth IRA at Charles Schwab, and he named other beneficiaries. I just found out that he has a revocable trust in his name alone, and the IRA and Roth IRA are now in the trust left to his son.
Do I have a right to these accounts? Should I write to Schwab and inform them that I never agreed to being removed as beneficiary? Does the fact that he is hiding it in a trust mean I can never challenge the trust and get some of the money? --OS via email
A: Your husband cannot entirely disinherit you, no matter what his trust says.
Every state has a law that entitles a surviving husband or wife to a share of his/her spouse's estate. These laws typically give the survivor the right to claim at least one-third of the estate. In some states, a surviving spouse is entitled to half the estate.
(One reason people sign prenuptial and post-nuptial agreements is to preserve their freedom to leave their money as they wish, rather than as these state laws dictate.)
After your husband's death, you can challenge any testamentary arrangement he made that leaves you a smaller share of his estate that the law says you're entitled to receive. Everything in his estate, including his IRAs, is subject to your legal claim as a surviving spouse.
But you don't have any legal grounds to challenge his IRA beneficiary designations while he's alive.
Federal law entitles you to be your husband's 401(k) beneficiary; he can't name anyone else unless you've agreed in writing to let him do so. But that law doesn't apply to Individual Retirement Accounts. When he moved his money into IRAs, he was free to name any beneficiary he wished without your prior permission.
In other words, don't waste your time writing to Charles Schwab about this. If you want to assert a claim to these IRAs during your husband's lifetime, it will have to be as part of a negotiated divorce settlement. (For more information about that, see my earlier post How to Divide Retirement Accounts in a Divorce Without Triggering a Tax Bill ).
If you want to assert a claim to these IRAs during your husband's lifetime, it will have to be as part of a negotiated divorce settlement. (For more information about that, see my earlier post How to Divide Retirement Accounts in a Divorce Without Triggering a Tax Bill ).
Please send your questions to Lynn@LynnBrennersFamilyFinance.com. I'm sorry I can't respond personally to every email. Questions are only addressed online.
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