Lynn Brenner's Family Finance

Does Soon-To-Be Ex Have Right to My 401(k)?

Q: My husband and I were married in May 2008 and I filed for divorce a month and a half ago. My 401(k) was set up long before our marriage, with my mother and son listed as beneficiaries. I never changed this. We live in Indiana. Is he entitled to half of the gains or contributions, or anything, since he was never listed as a beneficiary? -- FD via email

 

A: He is entitled to claim a share of the 401(k); but since you were only married for four years, his share is very unlikely to be 50%.

A marriage is an economic partnership. Generally speaking, assets acquired during your marriage are considered marital assets no matter whose name they are in. There are some exceptions to that rule. In most states, for example, if you inherited an asset during your marriage and you kept it segregated from your other accounts, it would be your sole property. An asset that you owned before your marriage and kept segregated from your marital assets would also be considered your sole property.

But all the money you've earned during your marriage is a marital asset and so are your 401(k) contributions and 401(k) earnings during that time. The same is true of your husband's earnings and retirement accounts.

In a community-property state, marital assets are split 50/50 in a divorce. But Indiana is an equitable distribution state, which means that marital assets are divided 'equitably'. Equitably means fairly. In a marriage that lasted 20 years or longer, a 50/50 split is usually considered fair; but in a short-lived marriage, the division would be ... more equitable. (Who decides what's fair? The divorce court.).

Your 401(k) beneficiary designations are irrelevant to how the account is divided in a divorce. But you should know that the federal law that governs 401(k) plans says your spouse is entitled to be your beneficiary unless he or she signs a waiver of that right. So unless your husband signed such a waiver, he is your 401(k) beneficiary by federal law, regardless of the fact that you didn't change your beneficiary designations.

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved

 

 

 

Can I Get Social Security on My First Husband's Record?

Q: I am 59 years old.  I was married to my first husband -- the father of my two children -- for more than 10 years. He is now deceased, and we were divorced at the time of his death. 

I remarried and divorced twice after that first marriage, but each of my two other marriages lasted less than 10 years. I've been unmarried for the past 14 years.

On the Social Security  website, it states that I would be eligible to draw a survivor's benefit from my first marriage even if I had remarried, provided I am not married at the time I apply for this benefit.  

I called the SS office and was told I would not be eligible for the survivor's benefit because I had remarried. The woman I spoke with said that I would only be eligible a benefit on the last husband's record --  but we were only married for two years and he is alive and well.  She also told me to check with my local office to see if they can tell me I am eligible. 

The website states that a survivor's benefit can be applied for at age 60.  I may be unemployed in another year, and I was hoping the person I spoke with on the phone is wrong. -CP via email

 

A:  She was wrong, but her advice was good. Clearly, she suggested you check with your local Social Security office because she herself wasn't sure of the answer.

The information on the website is correct: You are eligible for a survivor's benefit based on your first marriage if it lasted at least ten years and you're unmarried when you file for that benefit.

It doesn't matter that you had two subsequent marriages between the end of your first marriage and your application for a survivor's benefit.

In fact, if your second marriage had also lasted 10 years, and your second husband was also deceased, you'd qualify for a survivor's benefit from either of the two marriages, and you could apply for the larger of the two.

The earliest you can apply for a widow or widower's benefit is age 60. If you apply at 60, you will get a reduced amount. To receive the maximum benefit --100% of the amount your deceased first husband would be eligible to get at his own full retirement age -- you'd have to delay your application until you're 66 years old.

But what you can do is take the reduced survivor's benefit at age 60, and then at age 66 switch to your own full Social Security benefit if that's a larger amount. (For more information about the options available to people who are collecting a widow's or widower's benefit, see this earlier post.)

Make an appointment at your local Social Security office as the telephone representative suggested, and take a print-out of the information you found on the Social Security website with you. Be polite, patient, and persistent -- and if necessary, ask to speak with a supervisor.

 Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved

 

 

Collecting Social Security On An Ex-Spouse's Record

Q: I worked alongside my husband in our own business.  I took very small wages ($12,000 annually) and he took around $100,000 annually. Fifteen years ago, he fell in love with a 25 year-old and left our family.

I started collecting my Social Security benefit when I turned 65, and it is indeed very small.

When I speak with Social Security, they say they can’t tell me what my ex’s Social Security is for privacy purposes. I have been reading all of your options but not knowing if he is already collecting Social Security and if so, how much, I cannot make a decision which direction to go for my own Social Security. I really need an idea who could give me the information that I need. -- KM, via email

 

A: The Social Security Administration has the relevant information, and they will give it to you.

You may be entitled to a bigger benefit check. But you don't have any options to consider or decisions to make. The reason is that you're already collecting Social Security. Social Security options are only available to people who have reached their full retirement age and haven't yet filed for their benefits.

You've left out the two most important pieces of information, which are your ex-husband’s current age, and how long you were married. The fact that he remarried – I'm assuming he and that 25 year-old tied the knot – is irrelevant. Whether or not he is currently collecting Social Security is also irrelevant.

If your marriage lasted for at least ten years and you haven’t remarried, you are entitled to a spousal benefit based on his work record.

If you were still married to him, you couldn’t collect your spousal benefit until your husband had filed for Social Security. But the rule is different for people who are divorced. As a divorced person, you’re eligible as soon as your ex is old enough to collect Social Security -- even if he hasn’t filed for it – as long as you’re at least 62 years old, you haven’t remarried, and your own benefit is smaller than your spousal benefit.

For example, if you meet the other tests but your own benefit is $1,000 a month and your spousal benefit is $900 a month, you won’t receive any spousal benefit. The maximum you can receive is whichever amount is greater – your own benefit or your spousal benefit.

Assuming your ex was at least 62 years old when you applied for Social Security, you were eligible for both your own benefit and a spousal benefit based on his record. You should therefore now be collecting the greater of those two amounts.  

If your current benefit check doesn't reflect your spousal entitlement, it may be because you didn’t mention your ex to Social Security when you applied for your benefit. Or perhaps he was still under 62 at that time. Or -- less likely, but still possible -- you dealt with a Social Security representative who didn't know the rules. If any of those things happened,  you may be getting a smaller amount than you’re entitled to receive.

Make an appointment at your local Social Security office to discuss this situation. A face to face meeting is much better than a phone conversation. Take along a copy of your marriage certificate and a copy of your divorce decree. It’s useful to have your ex’s Social Security number (which you’ll find on copies of your old tax returns), but it’s not essential. The Social Security Administration can retrieve it.

They can tell you what your spousal benefit is, and whether that benefit is reflected in your current check. If not, you're entitled to have your benefit adjusted.

Two last thoughts:

Even if you never got a divorce and he hasn't yet filed for Social Security, you're entitled to know what your spousal benefit will be when he does file, and whether or not it will increase the size of your monthly check. 

And whether or not you ever got divorced, when this guy dies -- again, assuming your marriage lasted at least 10 years and you haven't remarried -- you can collect 100% of his Social Security benefit as his widow.  That's true no matter how many young women he may have married since he left you.

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved

Married But Separated: Will My Not-Quite-Ex Get My IRA?

Q: My wife and I have been separated for over 12 years. We're friends, but don't live together.

During our marriage, I accumulated about $300,000 in a 401(k). After our separation, I saved another $300,00 in a 401(k) at a different company.

Since then, I've retired and converted both 401(k) accounts to IRAs.

If I die still being married, does she automatically get all the money, or can I choose to divide it any way I wish, by designating any beneficiaries I want? - SP via email

 

A:  I'm all in favor of amicable break-ups, but it sounds as if yours may wind up being very expensive.

Had you divorced when you separated, your wife would have had an indisputable claim on a share of your first $300,000 401(k) account. But your second $300,000 account, which you'd have saved after the divorce, would have been indisputably all yours.

As things stand, she has a legal claim to a share of the entire $600,000.

You accumulated all that money during your marriage, so legally it's a marital asset. 'Married, but not living together, still friends' has no legal meaning. The law recognizes only two marital relationships: married or not married.  And as you clearly realize, you are married.

Marriage and divorce are subject to state law. When you get divorced in a community property state,  your spouse is entitled to half of your marital assets. If you divorce in an equitable distribution state, he or she is entitled to an equitable -- i.e., 'fair' -- share of your marital assets.

As for the inheritance rules, if this $600,000 were still in 401(k) plans, your wife would be entitled to inherit it all as your beneficiary even if you hadn't lived together for years. Employer-sponsored retirement accounts like 401(k)s are subject to federal law, which requires you to name your husband or wife as your beneficiary unless he or she has formally waived that right.

There's no such requirement for IRAs. You can name any beneficiary you wish. But the answer to your question really depends on the law of the state you live in.

Here's why:

Many states entitle your surviving spouse to a percentage of your estate -- usually one-third or one-half of your assets -- no matter what your will says. And in some states -- New York, for example -- your widow or widower can claim that share even against an IRA that you've left to other beneficiaries.

In other words, if you're still married when you die, it's possible that your wife will be able to claim some of this money as her legal share of your estate.

If you want to be sure that doesn't happen, you should ask for a divorce.

From what you say, your wife will probably be willing to oblige you. But if she hires a good divorce lawyer to make it happen, don't be surprised if that $600,000 comes up in the settlement discussions.

 

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

 (c) Lynn Brenner, All Rights Reserved