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Have You Checked Your I.R.A. and 401(k) Beneficiaries Lately?

Do you know that you can designate different beneficiaries under your I.R.A. (Individual Retirement Plan) than under your 401(k) plan? A 401(k) provides protections for a surviving spouse whereas an I.R.A. does not. The reason for this is that a 401(k) is an employee based plan that is governed by the federal laws of ERISA (Employee Retirement Income Security Act of 1974). A surviving spouse is automatically the beneficiary. If the employee wishes to name someone else as beneficiary the spouse must consent in writing.

The owner of an I.R.A. can designate anyone he/she chooses. I.R.A.s are not governed by E.R.I.S.A. If an owner of a 401(k) plan rolls it over into an I.R.A. the owner of the plan can designate anyone whom he/she chooses because it is not governed by federal law. Therefore, if the spouse was originally designated the beneficiary of a 401(k) which was converted into an I.R.A. and the owner changes the beneficiary to the children, the spouse is not protected.

Tip:

If you have an I.R.A. and want your spouse to inherit it, then request a beneficiary designation form, complete and sign and return it to the I.R.A. administrator. If you have a 401(k) and want your spouse to inherit it then also request a beneficiary designation form, complete and sign it and return it to the plan administrator. We suggest you regularly check your beneficiary designations especially if a divorce, death or re-marriage has occurred.

Law Office of Stephanie L. Schneider, P.A.