In general, property law is state law. There are a few exceptions and one of them is Spousal Consent to change a beneficiary on qualified plans.

Many employees are surprised to find out that they must name their spouse as primary beneficiary of their retirement benefits unless the spouse consents to their naming another beneficiary.

I’ve often thought this provision was unconstitutional but since its enactment in the Retirement Equity Act 1984, it has survived unscathed. Doesn’t it sound odd to you that your compensation, for your labor, is not under your control? Aren’t your earnings your property? Since when does your spouse have a right to receive part of your pay?

Of course, these plans, like any other asset have always been reachable in a divorce property settlement. But the federal law is that even without any divorce or separation, the spouse has a property right. It is very important to address this issue in a pre-nuptial agreement so that the spouse is contractually obligated to sign a consent. Getting this right is important and there is much litigation over whether purported waivers in pre-nuptial agreement are effective to satisfy ERISA’s requirements.

One very important exception is that this requirement does not apply to IRAs. If you take a rollover from your 401 (k) and put it in an IRA – the spousal consent provision do not apply.

Recently I had occasion to run into a financial institution who took the position that even though the law didn’t require it, they were requiring spousal consent to change the beneficiary of an IRA. It was an internal policy only. What the heck? They think they can create property rights? If you run into this situation, and can’t get the financial institution to see the light, move the account to a financial institution that follows the law and doesn’t add their own paternalistic requirements to your property.

The post Spousal Consent or Who Owns your Retirement Plan? appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

Estate planning aims at the transfer of wealth from one generation to another in a way which minimizes taxes and maximizes economic gain. It usually involves parents making gifts to their children, grandchildren, or charities. The problem is that while many clients spend hours with attorneys, accountants, and financial advisors crafting an estate plan, they spend no time with their intended beneficiaries explaining what they have done and why. After mom and dad are gone, the family acrimony begins – brother sues brother and sisters stop talking to one another for years.

Since your typical (dysfunctional) family has trouble communicating about day-to-day activities such as what to have for dinner, perhaps it is no surprise that the typical family cannot and does not communicate about dying, property division, and settling estates. Nevertheless, communicating the plan and addressing the issues before death is the best gift you can give your beneficiaries.

It is not bad manners to talk about the estate plan, and it will not make matters worse. What makes matters worse is leaving the children to fight it out after mom and dad are both gone. If you are afraid to tell your kids what your estate plan is, you are leaving them a legacy of acrimony. Talking about the plan and discussing it can ensure that hidden agendas are brought out into the open, get the most buy-in from the parties, and get the best protection against the plan being contested.

A good estate planning attorney can help with this process if the clients are willing. The attorney does not do family therapy, but rather aims to resolve disputes while attempting to preserve family relationships. It depends on opening lines of communication and coming up with solutions.

Open communication is also good for planning and discussing long-term care issues with parents, to determine how siblings can share equitably the responsibility of helping aging parents, and how to deal with caregivers and medical personnel.

Much is at risk in estate planning, and the most important is not estate and inheritance taxes. The most important factors are the beneficiaries, their lives and their relationships – in other words, the family.

The post Discussing ‘The Estate Plan’ with Beneficiaries appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.