Why aren't retirement accounts of married decedents considered joint assets during probate?

[Phil Williamson]

From what I understand, retirement accounts are generally considered joint assets if a couple were to split up. They are considered joint assets even if they are in one spouse's name. But if a spouse dies and the retirement account has been setup with a beneficiary, that beneficiary will get the account rather than the spouse. I suppose the same thing might be true for property which is in the decedent's name which has a Transfer on Death Deed. The property would go to the person on the ToDD rather than to the spouse. Why is that? Why do these assets go 100% to the beneficiary rather than being automatically considered as joint assets in same way that they are during divorce?

 

[zddoodah]

What state's laws are you concerned with?

 

[retic]

From what I understand, retirement accounts are generally considered joint assets if a couple were to split up. They are considered joint assets even if they are in one spouse's name. But if a spouse dies and the retirement account has been setup with a beneficiary, that beneficiary will get the account rather than the spouse. I suppose the same thing might be true for property which is in the decedent's name which has a Transfer on Death Deed. The property would go to the person on the ToDD rather than to the spouse. Why is that? Why do these assets go 100% to the beneficiary rather than being automatically considered as joint assets in same way that they are during divorce?

401k Beneficiary Designations: Getting the Right Assets to the Right People - 401khelpcenter.com

The Spouse Is the Automatic Beneficiary for Married People

A federal law, the Employee Retirement Income Security Act (ERISA), governs most pensions and retirement accounts. Under ERISA, if the owner of a retirement account is married when he or she dies, his or her spouse is automatically entitled to receive 50 percent of the money, regardless of what the beneficiary designation says.

If another person is the designated beneficiary, the spouse will receive 50 percent of the assets and the designated beneficiary will receive the other 50 percent. A spouse always receives half the assets of an ERISA-governed account unless he or she has completed a Spousal Waiver and another person or entity (such as an estate or trust) is listed as a beneficiary.

A spouse can forgo his or her right to 50 percent of the account by properly executing a Spousal Waiver. However, generally a Spousal Waiver is not permissible under ERISA unless the spouse is at least 35 years old, depending on the type of retirement plan.

These rules can cause problems when the owner of a retirement account remarries. Often, the owner will change his or her beneficiary designation upon divorce and name the children as the designated beneficiaries. If the owner later remarries, though, 50 percent of the retirement assets will go to the new spouse instead of the children, even if the new spouse is not added as a beneficiary.

 

[Phil Williamson]

What state's laws are you concerned with?

This isn't for anything specific. Just something I've wondered about in general about estate management and probates. I always though it was odd that a married person can designate that their typically joint assets like 401k's, IRAs, property, etc. go to a random person rather than their spouse upon their death.

Is it handled differently depending on the state? Do some states treat these kinds of accounts as joint assets while others treat them as independent? For instance, perhaps in CA only 50% of the account would go to the beneficiary and other other 50% would go to the spouse?

 

[flyingron]

Other than the ERISA rules @retic points out, it depends on the state. Some states have additional community property rules that apply. So it really can't be answered as such a vague hypothetical.

 

[army judge]

From what I understand, retirement accounts are generally considered joint assets if a couple were to split up. They are considered joint assets even if they are in one spouse's name. But if a spouse dies and the retirement account has been setup with a beneficiary, that beneficiary will get the account rather than the spouse. I suppose the same thing might be true for property which is in the decedent's name which has a Transfer on Death Deed. The property would go to the person on the ToDD rather than to the spouse. Why is that? Why do these assets go 100% to the beneficiary rather than being automatically considered as joint assets in same way that they are during divorce?

This article discusses how a military pension gets distributed WHEN the spouses divorce.

Intuitively one could imply this happens in most cases, insofar as pensions/retirement income is concerned.

If this disturbs you, don't get married.

Staying SINGLE allows you to determine who gets your assets upon your demise.

Dividing Military Pensions in a Divorce

 

[hrforme]

This isn't for anything specific. Just something I've wondered about in general about estate management and probates. I always though it was odd that a married person can designate that their typically joint assets like 401k's, IRAs, property, etc. go to a random person rather than their spouse upon their death.

Is it handled differently depending on the state? Do some states treat these kinds of accounts as joint assets while others treat them as independent? For instance, perhaps in CA only 50% of the account would go to the beneficiary and other other 50% would go to the spouse?

To get a different beneficiary, the spouse must sign off on the change and have it notarized since like someone else posted, it's automatic that they are the beneficiary unless they have waived their rights. This is federal law, and is not different by state.

 

[flyingron]

The change in beneficiary on ERISA-covered accounts is federally mandated, but that's not the question.

The question is if the marriage is split up, how do the assets include the retirement accounts get divided. That goes way beyond the ERISA protection (which is purely to keep a person from removing a spouse as a beneficiary without consent). Retirement accounts do indeed get figured in equitable division and in community property divisions at dissolution of the marriage which IS VERY MUCH a state thing.