Does your retirement plan fall under ERISA rules? The ERISA laws set minimum standards for most voluntarily established employee-sponsored retirement and healthcare accounts, such as 401(k)s, giving surviving spouses the right to inherit all the money in the account even if there are other named beneficiaries. The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.
This ERISA rule means that if you for example name someone such as your children as the beneficiary to your 401(k), and then get divorced and later remarry without changing your beneficiary, your new spouse and not your children is the legal heir to your 401(k). This rule was put into place to protect surviving spouses so they can’t be disinherited. But how do you ensure your named heirs inherit what you want them to receive, despite the ERISA rules?
ERISA rules do provide a way for the planholder’s spouse to acknowledge and waive their inheritance rights under the federal law.
• A spousal waiver that gives up their rights will allow the spouse to name a different beneficiary.
• The administrator of the company plan should provide the employee with the spousal waiver form.
It’s important to note that the spouse must voluntarily agree in writing to the waiver. Informed spousal consent is critical to the validity of the spousal waiver.
Note: IRAs and other non-employment-based retirement accounts are not subject to the ERISA rules.
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Meet with an estate planning attorney to help you prepare for the unknown and the unexpected. Though it may be tempting to put off, creating an estate plan can help prevent serious issues down the road. When you work with an attorney to decide what will happen to your assets after you die, they can create an estate plan that gives you peace of mind today. To talk to an estates and probate attorney contact the Estate & Probate Legal Group in Lombard Illinois at 630-382-8065.