You Could Accidentally Disinherit Your Children Unless You Follow This Obscure Rule

Mike Piershale, ChFC, President   Fri, September 10, 2021

If you’re widowed or divorced and have named your children as the beneficiaries of your company retirement plan, you could be putting them at risk of being disinherited if you remarry.  Due to a little-known ERISA rule, if your new spouse outlives you, they will receive your company plan funds, rather than your children — even if you have put your children down as your named beneficiaries.

While the purpose of the Employee Retirement Income Security Act of 1974 (ERISA) is to stop one member of a married couple from giving survivor benefits to someone else that should rightfully go to the surviving spouse, in some scenarios this law can lead to abuse.

The Sad Story of Leonard Kidder

For example, Leonard Kidder named his wife of over 40 years, Betty Kidder, as the beneficiary on his 401(k) plan, but after she died, he made some changes on his beneficiary form, naming his three adult kids as the new beneficiaries.

In 2008 Mr. Kidder decided to get remarried to a woman named Beth Bennett. Just six weeks later, he died … and an ugly dispute between the children and the new wife ensued. As the listed beneficiaries, the children expected to receive their father’s 401(k) assets, which totaled nearly $250,000. But the new Mrs. Kidder insisted that as the wife, she should be entitled to them.

After a legal battle between the children and Beth Bennett Kidder, the courts awarded the 401(k) assets to Mrs. Kidder, even though the three children had been named as the beneficiaries.

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https://finance.yahoo.com/news/could-accidentally-disinherit-children-unless-083004545.html