When Are You Really a Spouse (For Retirement Plan Purposes)?

By Beverly DeVeny, IRA Technical Expert
Follow Me on Twitter: @BevIRAEdSlott

Valentine’s Day is coming up. I know this for a fact because I have seen the heart shaped boxes of candy in the Godiva chocolate store. Many of you will be buying some sort of gift for your spouse. But is your spouse really your spouse?

Take the case of the Lees family for instance. He left the northwest, and his wife (wife #1), to find work in the south. He found work and a new wife (wife #2) – complete with a wedding ceremony. He named her as the beneficiary of his employer retirement plan. When he retired, he started collecting benefits based on his age and that of wife #2. Then he died. This galvanized wife #1 into action. She tried to cut out wife #2 and put in a claim for her spousal benefits. She won in court. He never divorced wife #1 so she is entitled to the spousal benefits. “Wife” #2 is not his wife.

Now consider the case of the Smith family. They have lived together for six years. He has died. She is the beneficiary of his IRA. She wants to take it as a spouse. She has considered herself to be married to him because, after all, she put up with him for six years. She says she is his common law wife.

State law defines what a marriage is for the residents of that state. Most states will recognize marriages that are legally performed in any other state. Maybe “Mrs.” Smith is the wife of Mr. Smith. But, maybe she isn’t. State law will make that determination.

Then there is the case of the Jones’. They lived together for a number of years before they eventually married. While they were living together, he participated in an employer retirement plan. He told his employer that his marital status was “divorced.” He retired and moved his plan funds to an IRA. He told the IRA provider that he was “single” and named his children from a prior marriage as the beneficiaries of his IRA. At the time of his death, his now wife filed a claim for the IRA funds. She contended that since they were plan funds, and she was his spouse, that she was entitled to that money. The court ruled against her saying that she was not the spouse while he was employed. Spousal rights to plan funds do not carry over to an IRA.

As a final note, an ex-spouse is not a spouse. Even if they are still named on a beneficiary form, they are now a non-spouse and must follow the non-spouse beneficiary rules. But be careful here. If you have put “my spouse, Leslie” on your beneficiary form and your spouse is now Fran, your beneficiary is going to have a problem.