In Retirement, Benefits Aren’t An Option

Posted on Monday, November 16th, 2015 at 9:52 am

There you are, happy as a clam, handling the bills and letting your husband take care of the big financial decisions. Then he dies, or leaves you for a cutie pie half his age. What happens to the financial safety net you thought you had?

That depends. Here’s what every woman needs to know about getting her fair share in case she’s widowed or divorced.

HEALTH INSURANCE

If you’re covered under your husband’s employee plan:

hi1. You can usually stay in the plan for up to three years, at your expense, if his company employs 20 or more people. You’re charged the cost of the insurance to the employer plus (possibly) 2 percent. Don’t miss any of the deadlines! For example, you have to notify the insurer within 30 days of your husband’s death or 60 days of your divorce or legal separation.

2. Usually, you cannot stay in the plan if his company employs fewer than 20 people. If you’ve been covered under his group insurance for at least 18 months, however, you can buy an individual policy with no health exam and no waiting period for preexisting conditions.

If your family carries its own policy, you can keep it if your husband dies. Be sure to tell the insurer that one less person is being covered, which will lower the premiums. If you divorce, simple fairness should dictate that the insurance stays with the spouse in poorer health, who may not be able to find other coverage.

SOCIAL SECURITY

You can collect on your husband’s account if you’re a widow who’s at least 60 or a disabled widow who’s at least 50. Ditto for divorced spouses of the same age if your ex-husband dies and if your marriage lasted for at least ten years.

You can also collect if your husband or ex-husband dies and you’re caring for a child of the marriage who is under 16 or was disabled before age 22. In this case, it doesn’t matter how long the marriage lasted.

If your husband or ex-husband dies, your children get a monthly payment on his account if they’re under 18, under 19 and still in high school, or were disabled before age 22.

Payments made to a first wife, by the way, don’t take one dime away from a second wife. Each of you gets the full amount allowed. At death, the widow (not the ex) can collect a $255 burial payment. In most cases, widows and qualified divorcees get 71.5 percent to 100 percent of their husband’s full benefit, depending mainly on their age when they claim the benefits.

If you’ve held a paying job, you probably have your own Social Security account. But at retirement, you can collect on your husband’s account, instead of yours, if you’d get a bigger benefit that way. Thanks to this rule, women who spend most of their lives raising children receive Social Security for their efforts. (If you earned most of the family income, your husband might get a better benefit from drawing on your Social Security account!)

If you and your mate are retired and he dies, your total Social Security income will decline–by how much depends on a bunch of circumstances. When you first apply for Social Security, ask what will happen after either of you dies.

PENSION

When your husband retires, his pension plan normally sets up joint-and-survivor payments lasting as long as you both shall live. That way, you get some percentage of his pension–typically 50 percent–if he dies before you. But joint-and-survivor pensions provide smaller monthly payments than if the pension were to cover his life only.

The law doesn’t let your husband take a pension that ends when he dies, unless you agree in writing. You might agree if you have an ample pension of your own.

Sometimes, an insurance salesperson talks you into a different arrangement. Your husband takes the pension for his life only, then uses the extra monthly income to buy a life insurance policy. If he dies before you do, you lose the pension but gain the insurance proceeds.

This is a pretty risky arrangement. You have to invest the life insurance in such a way as to get as large an income as the pension would have paid. That’s not always possible. I’ve studied lots of these deals and do not recommend them.

Incidentally, your consent is needed only in traditional pension arrangements and, in certain cases, 401 (k)s. If, with your consent, your husband rolls all his money into an Individual Retirement Account, he can spend it as he likes without giving you a dime.

What about pensions in divorce? You’re generally entitled to a share, although not necessarily half. When you both have retirement savings, both plans will be on the table. A woman will often take property in lieu of a piece of her ex-husband’s pension. If all you can get is a future allocation, be sure that your lawyer follows all the rules. It’s complicated to assert your rights to pension-plan money. If you’re already divorced and didn’t include the pension in your divorce agreement, it’s too late now.

INHERITANCE

You get all the property you and your husband jointly own. You cannot legally be cut out of his will (unless you signed a prenuptial agreement).

Now for some trickier questions:

* What if he dies when you’re legally separated but not yet divorced? Then you collect whatever he has left you in his will. If he cut you out of his will, you can march into court and claim your spousal share–anywhere from $50,000 to half the assets, depending on your state and how long the marriage lasted.

* What if you’re named as beneficiary on your ex-husband’s life insurance policy, retirement plan, or living trust? If he dies before removing your name, most states let you collect–even if your ex has married again. Let this be a wake-up call to the Second Wives Club: Make sure your husband is leaving all his property to you.

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