Lynn Brenner's Family Finance

Can My Husband Get My 401(k) Plan?

Q: My husband wants my 401(k) now, but I don't want to get distributions until I have to. Will he win if he goes through the court system? What is his right to my 401(k), which I opened before I married him? Right now, my daughter is my beneficiary. We have no pre-nuptial or post-nuptial agreement. --MT

 

A: Stop worrying. Your husband has no case to take through the court system. As long as you're alive, he has no legal claim to your 401(k) account. 

In fact, even if you want to take a 401(k) distribution yourself, you can't  do it while you're working for the company that sponsors the plan, unless you qualify for a special hardship withdrawal.

But your husband is legally entitled to be your 401(k) beneficiary unless he has waived that entitlement in a post-nuptial agreement. (Nobody can waive it in a pre-nuptial agreement because it's a right that doesn't exist until after you're married.) In fact, if you didn't give your 401(k) plan administrator a written waiver signed by your husband, the plan shouldn't have let you list your daughter as your beneficiary.

So what are your options if you want to make sure your husband doesn't inherit your 401(k) plan?

You have three choices:

1. You can persuade him to sign a waiver. 

2. As soon as you leave this job, you can transfer your 401(k) account into an Individual Retirement Account. (See my earlier posts on how to do a trustee-to-trustree transfer to avoid taxes.) IRAs aren't governed by the federal law that establishes the rules for 401(k)s. You can name your daughter or anyone else you choose as your IRA beneficiary. 

3. You can divorce your husband.  However, in a divorce he may get part of your 401(k) account even though you opened it before you married him. The reason: In most states, an account you have contributed to during your marriage is considered a marital asset. That makes it subject to division in a divorce. How big a share your husband might get depends on many variables, including how long you've been married and what other marital assets you own.  

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

Does My Father's Bank Account Have To Be Used for His Medical Expenses?

Q: My question is about a bank account that my father has set aside for me that requires proof of death. He is bedridden and not able to leave a care facility, so Medicaid is going to start receiving his Social Security checks.

Will they consider this account an asset of his, and try to take it to pay medical expenses? --DW via email

A: What do you mean, will they consider this account his asset? It is his asset!

You may be in the habit of thinking of it as yours, but in fact this account belongs to your father. It won't be yours until he dies. That's why the bank requires proof of his death before letting you touch this money.

It sounds as if your father is receiving Medicaid assistance to pay his medical and/or long-term care nursing home bills. Medicaid's rules vary considerably depending on the state. But generally speaking, your father would have to spend most of his own income and assets on his care before he became eligible for Medicaid assistance. (And the payments your father made towards his care would go to the care facility, not to Medicaid.)

There are two 'exempt' assets for Medicaid purposes -- i.e., assets that your father wouldn't have to use to pay for his care before qualifying for Medicaid assistance. They are his primary residence and his Individual Retirement Account. His annual IRA distributions would have to be paid towards his care; but the IRA principal would be protected. (Of course, depending on the length of his nursing home stay, eventually the IRA principal would all be paid out in annual distributions.)

But the account you describe sounds like a straightforward 'pay-on-death' (also known as an 'in-trust-for') bank account, not an IRA.  In that case, as far as Medicaid eligibility is concerned during your father's lifetime the money in this account is available to pay for his needs.

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 Reserve

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