Before you and your spouse begin the process of legally separating, it’s
important to note that automatically revoking your spouse’s designation
as your beneficiary may violate the spousal death benefit rules in your
Unless your spouse has consented to your waiving of the spousal benefit,
qualified retirement plans are required to pay for 50% or more (100% in
profit-sharing plans) of the death benefits to the participant’s
spouse. No matter who the participant designates as their beneficiary,
these rules, known as qualified pre-retirement survivor annuity (QPSA)
rules, will apply.
While certain plans are designed to revoke the participant’s spousal
beneficiary designation automatically following a divorce or legal separation,
a legal separation will only eliminate the need for spousal consent if
the participant chooses to waive the spousal death benefit in order to
select a new beneficiary. The only ways that a separated spouse will no
longer receive the benefit is if the participant both waives their death
benefit and selects a new beneficiary.
Even though a legal separation removes the need for spousal consent in
order to waive the spousal death benefit, automatic revocation language
cannot satisfy waiver rules alone. Under the QPSA rules, automatic revocation has no effect on the legally separated spouse’s
rights to death benefits. The automatic revocation language in a plan
can frequently lead to the faulty belief that it eliminates the death
benefit rights of a legally separated spouse, which can lead to the wrong
person receiving death benefits from a plan administrator.
The IRS, in an attempt to prevent confusion in the future, is no longer
allowing pre-approved plans to include automatic revocation language involving
spousal beneficiary designation following a legal separation. This language needs to either be eliminated completely from individually
designed plans, or must make clear that the automatic revocation doesn’t
affect the QPSA death benefit rights of your spouse. These changes do
not affect the automatic revocation of your spouse’s designation
as your beneficiary following a divorce.
If you are seeking a legal separation, it may be in your best interest
to contact a qualified legal expert to assist you. The San Bernardino
family law attorneys at James D. Madden & Aruna P. Rodrigo, Family Law Attorneys understand how
difficult this situation can be, and have the experience and knowledge
necessary to help you reach the best possible outcome.
Contact us today for a free case consultation, or give us a call at (909) 344-5704 to set
up a meeting with one of our lawyers.