How To Protect Your Spouse From Financial Harm. Caring partners each want the other to be financially protected when the other, God forbid, leaves the physical world. But sometimes they make shortsighted choices and/or accidentally cut a spouse out of the money he or she needs by failing to submit the appropriate paperwork. An article by Jane Bryant Quinn states shortsighted choices can cause harm in the future. Here are four things couples should think about that can save a spouse from financial harm:
1. Leave a larger income. Don’t take Social Security right away. If your’re healthy you’ll probably live longer than you expect. By waiting to file for Social Security you’re storing up extra income for your retirement’s later years. Married people shouldn’t think only of their income today. If the husband was the main breadwinner, the longer he waits before collecting, the larger the income he’ll leave to his surviving spouse, if he dies first.
2. Who is the beneficiary of your Individual Retirement Account (IRA)? Make sure you clean up all your beneficiary forms when you divorce or marry or remarry to avoid any accidental or disinheriting a spouse. Whoever you name on your IRA’s beneficiary form will get the money. This way your “ex” won’t get the money.
3. The power of “I Do.” When you marry your spouse is entitled to your 401(k), from the moment you say “I do” in matrimony. That’s what the federal law says. The beneficiary form and Will is irrelevant. If you want to leave part or all of your 401(k) to children of a previous marriage it would be appropriate to ask your spouse to waive his or her rights. The waiver needs to be in writing and notarized and filed with your plan. This cannot be done in advance of the wedding as only the spouse can waive these rights. In a prenuptial agreement it should include a promise to sign. And if your betrothed truly loves and cares about you it will be notarized as soon as possible.
4. Will your spouse get the income from a Variable Annuity with guaranteed lifetime benefits? These annuities combine an investment with a guaranteed lifetime income. But like some pensions, the income normally lasts only for the buyer’s lifetime, then ends when he or she dies. Any spousal benefits might cover only the annuity’s current investment value or death payout, according to investment research expert Kevin Loffredi of Morningstar Firm. Couples don’t realize that their annuity cuts out the survivor which evaluates variable annuities. If you want the annuity to cover both lives you have to pay more or accept a lower income guarantee. If you venture into one of these complex contracts think “spouse first.”
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