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What If An Ex-Spouse Is Named the 401(k) Beneficiary?

What If An Ex-Spouse Is Named the 401(k) Beneficiary?
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My ex-husband passed away. However, I was named the beneficiary on his 401(k). Even though we are divorced, do I still have a right to it?

Divorces can be messy. This is especially true when it comes to the question of who will inherit your 401(k).

But it doesn’t have to be messy at all … Your divorce agreement will specify whether your ex-wife or ex-husband can inherit your 401(k) or other retirement accounts.

Want to avoid the mess? Update your estate planning documents and beneficiary designations after getting divorced!

What Does The Divorce Settlement Agreement Say About the 401(k)?

This question also illustrates the importance of having a well-drafted and thorough divorce settlement agreement, one that details the rights and obligations of each spouse after divorce.

A comprehensive divorce agreement and timely modifications to wills and account beneficiary designations can eliminate any issues concerning the rights of a former spouse about the other’s retirement assets.

A divorce decree or settlement agreement should specify the rights of each spouse to any retirement assets held by the other. If the decree or settlement agreement provides for one spouse’s interest in the other’s retirement asset, the death of the other spouse shouldn’t, by itself, extinguish that interest.

What If An Ex-Spouse Is Named the 401(k) Beneficiary?Is There A ‘Governing Instrument’?

Some states revoke, by operation of law, a payable on death (POD) beneficiary designation of an ex-spouse. However, such a statute would only be controlling if there’s no governing instrument addressing the asset in question.

If there’s a governing instrument (like a marital settlement agreement and/or a Qualified Domestic Relations Order (QDRO)) the terms of that governing instrument will be controlling.

If the retirement asset is a 401(k), a QDRO would likely have been required post-divorce to secure the interest of the receiving former spouse. After this is prepared and filed with the court, the QDRO would be forwarded to the plan administrator of the retirement account for implementation and distribution to the former spouse.

However, if there’s no divorce decree, agreement or QDRO confirming the interest of a former spouse in the other’s retirement asset, the former spouse would likely not be successful trying to claim a portion of that asset—despite the fact that he or she is the named beneficiary. That’s because there’d be no governing instrument vesting him or her with the right to receive all or a portion of the asset.