Benefit Transfers When a Spouse Dies

Your spouse dies, and after the initial grief, you find your prescription that never cost a cent before is suddenly priced at $195. Whoa! You go home grumbling to yourself — what do they mean?! Are the benefits that came through your spouse gone?

If you’ve been receiving health insurance and pharmaceutical benefits through your spouse’s employer, contact the plan administrator to find out if you can retain this coverage. COBRA rules typically allow a widow/widower to remain on the former employer’s plan for up to 36 months, twice the normal time limit.

Social Security Benefits

More than 6.1 million widows and widowers receive more than $6.68 billion in monthly Social Security benefits based on their deceased spouse’s earnings record. How does this work? A widow or widower can receive:

  • Reduced benefits as early as age 60 or full benefits at full retirement age or older.
  • Benefits as early as age 50 if he or she is disabled and the disability started before or within seven years of your death.

Retirement Accounts

How retirement accounts are handled can make a huge difference — and yet, many people don’t realize the implications of making the wrong decision. Or even of making no decision at all. Indeed, it’s not enough to make money; you have to protect it as well. IRAs, for instance, are not covered by your will. When you open an IRA, you should complete the beneficiary designation form. Whoever is named on the form when you die receives the funds — and it could be an ex-spouse or a disinherited child. A will won’t override this.

With 401(k)s, if you’re married, the law says that your spouse will receive the account. Even if you’ve been legally separated for years and now live with somebody else, your spouse is entitled to the account on your death. The only way around this is to have a spouse sign a waiver agreeing to be disinherited.

Those workers with a traditional company or government pension should consult the plan documents to make sure they understand the terms and options. Many companies, agencies or unions have staff who can help with this.

Plan for the Future Now

Few financial situations are more complex than inheritance rules — and your decisions can have serious implications. This article covers just the basics; there are other rules and events that can change your situation. Be sure to contact a qualified professional to make sure you understand your particular status before a death in the family forces you to address these issues in the middle of your grief.

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