Us’ns. February 2017
By Timothy S. Barkley, Sr.
“Let’s start with your retirements,” the attorney continued from last week’s article (available online at http://barkleylaw.com/his-hers-and-ours-0117) … “Do you have a prenup?”
The clients shook their heads.
“I’m not a fan of building escape hatches into marriages,” the attorney confided, “but if you’ve agreed about things like 401(k)s and IRAs, it’s good to put those agreements in writing. That way if there is a disagreement, even after the death of the first to die of the two of you” – Herb grimaced as Michele glanced at him – “there’s a clear record of what you agreed to do.”
“Nope,” asserted Michele, “we talked about that but never really got around to it.”
“If you don’t have a marital agreement – prenup, postnup or whatever – or a signed waiver, your surviving spouse gets all the money in the retirement plans.”
“What if my son is the beneficiary of my 401?” asked Herb. “It was set up that way before we got married.”
“Federal law says that your spouse is the beneficiary unless she has signed a waiver, either in an agreement or as part of the beneficiary designation. That overrides your beneficiary designation. Of course, Michele would never take the money, but if she were in a nursing home or had creditor issues, her creditors would take the money in a heartbeat.
“You can sign a marital agreement now – a postnup – or Michele can sign a waiver, but something needs to be done to protect your plan, for both of you.
“Herb, is there anything in your divorce about your military pension?”
“I have the separation agreement here,” he responded, “and it was part of the judge’s order in the divorce. Here’s where it talks about the pension.”
“It says that she gets the spousal share of your pension and your survivor benefit. The military only allows one spouse or former spouse to receive that benefit, so I think you need to chat about the pension. I don’t think Michele gets it.”
She pondered, then shrugged. “That’s OK. It is what it is. It’s not like I married him for his pension. I mean, it would have been nice, but I can live on my retirement from work. Just less to go to the kids when I croak.”
Herb chimed in, “We don’t mind spending our money on what we want or need. If we leave anything to the kids, that’s gravy for them.”
“Except for your son … what’s the name of your youngest?”
“Gavin,” they chimed in.
“Except for Gavin. We need to be sure he’s taken care of.
“State law says that we can’t leave more than $10,000 to a minor without some sort of trust, either one you create or one the judge imposes. Most of my clients want to have some say in how all that works, so we include a trust in your will.
“Because Gavin is so much younger than the rest of your kids, you might think about how to divide things up. The older ones have had college paid for, are established in careers, that kind of thing. He still has to finish high school.
“Some of my clients would leave more than the mathematical ¼ to Gavin. Have you thought about how you want that done?
“Also, you can’t just make him the beneficiary of Michele’s 401(k) if Herb doesn’t survive her – the ‘contingent’ beneficiary. You would want to set up a trust for him in your will and make that trust the contingent beneficiary of your 401, and your life insurance.
“That way it’s held for him and your ‘trustee’ can manage the money and decide what to spend it on besides just basic support and maintenance. A more experienced hand at the helm can protect him against mistakes made from inexperience.
“Have you talked about that?”
“A little. We need to think about all this,” Michele ruminated. “Let’s go over it next time.”
Attorney Tim Barkley
The Tim Barkley Law Offices
One Park Avenue
P.O. Box 1136
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