question about 401k division

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question about 401k division

Unread postby jimbob12564 » Mon Nov 06, 2017 11:15 pm

Rookie question 2 -
If the wife signed over her rights to be a beneficiary on my 401k/403 years ago does that make the asset divisible still during a divorce (in Colorado)? I don't have the paper because I had to give the notarized original papers to Fidelity/Vanguard/etc but it took a notary to do it and I then changed the beneficiaries to my kids so it was a pretty big deal that would have a paper trail somewhere.

I'm pretty sure if I died the assets would bypass her but I'm not sure if it matters for a divorce although I'm hoping she effectively gave up her rights to the money when she signed the papers. I have approximately 8x the money in my 401k as she does because I contributed religiously while she did not so yes, I'm looking to hold on to as much as I can.

Would appreciate any insight into this the forum might have.
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Re: question about 401k division

Unread postby TJinCA » Tue Nov 07, 2017 12:25 am

Check with a lawyer but I doubt if her giving up her beneficiary rights makes the 401k not community property.

And what "you" contributed to "your" 401k during the marriage was also community property..

In my opinion, trying not to give your ex what she's legally entitled to just makes divorce more bitter and more expensive.
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Re: question about 401k division

Unread postby LovingDadof2 » Tue Nov 07, 2017 6:18 am

OP, what State and ages of children?

I agree with TJ. Most likely the money that has been contributed and accumulated during the marriage in both the 401k's will need to be split in 1/2. Check with a lawyer. I don't know your STBX, but starting off this controversial may cost your a lot more in the pocket than if you learn the laws of your state first and plan accordingly.

Also, the courts are not going to make your children (minors) millionaires even if they are listed as beneficiaries. The court will appoint a guardian to look over the money for them and use in their best interest. And guess who that is going to be, their mother. You didn't cut her out. Your best bet, if you desire to keep the money out of her grasp, is to establish a trust and appoint someone to manage the money of the trust.
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Re: question about 401k division

Unread postby HaltAndCatchFire » Wed Nov 08, 2017 8:44 am

What do you mean by "signing over rights to be beneficiary"? Are you talking about a prenup agreement?

The pre-marital portion of your 401k will be excluded from the scope of divorce.

Colorado is equitable division, not community property.
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Re: question about 401k division

Unread postby Trevor » Wed Nov 08, 2017 8:53 am

My guess is that in some cases (e.g., insurance, beneficiaries) a married person being removed from an account/policy has to sign an acknowledgment agreeing to the removal of their name from the account/policy.
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Re: question about 401k division

Unread postby jimbob12564 » Wed Nov 08, 2017 12:05 pm

So looking at it now, it isn't clear to me exactly what it meant when we removed her as a beneficiary of the account many years ago and I still need to talk to a lawyer. It wasn't a prenup (facepalm why didn't I have a prenup :) )
And it isn't that I'm not going to give her money, I'd rather just do it on my terms because its really the only asset I have besides the house. In making the change I can say it wasn't as simple as updating a web page so that I could tweak it constantly and in my head that made me think I was having her revoke a claim to the account.

Money managers like Vanguard, Fidelity, etc like to have you name beneficiaries in case the worst happens right. I think generally it defaults to a spouse but since I recognized quite a few years back that we might be having issues, I tried to change the beneficiary to my kids and another family member. Vanguard said when I updated beneficiaries that was basically so that the money would go to a secondary source in case me and the STBX dies on the same airplane but otherwise she would get it most of the time. He said I could fill out a form and have it notarized saying the spouse voluntarily waived rights to be the beneficiary however and so we did that. Since he wasn't a lawyer I'm not really sure what it bought me legally but it sounded good at the time :) . We had them notarized so it was clear everyone consented and life went on even keel with consent. At the time I was thinking this meant she was giving up her claim to the assets but it might simply be that she gave up claim to the assets in the event of my demise and as long as I'm living she still has a claim. I just can't tell. I don't see anything on the account that shows her as a joint owner but of course I think legally that doesn't matter.

If nothing else this thread might serve as an example to anyone who tried something similar.

Thanks for the feedback guys!
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Re: question about 401k division

Unread postby Trevor » Wed Nov 08, 2017 1:28 pm

1. No need for a lawyer. Removing her as beneficiary in no way shields the asset from equitable division by the court. At least part of it is marital and subject to split, unless you two agree, in writing, that it's all yours.

2. No, you're going to give her money according to the court's terms. That's what it means to get a divorce. The only way around that would be a consent decree hammered out at your dining room table and submitted to the court for execution.

3. Since you are still alive, it's a marital asset that isn't a savings account for the beneficiaries.
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Re: question about 401k division

Unread postby jimbob12564 » Wed Nov 08, 2017 1:52 pm

ahhhhhhhh got it. Thanks Trevor.

How does one get a consent decree?
Is it as simple as writing and signing an agreement ourselves and maybe getting a notary or is it some specific form that I need to search for.
Since things are amicable between the two of us I think we can actually come to an agreement on most matters still and I have a grandiose vision in my head that we can craft 90% of the plan ourselves, mediate a little bit with a pro, then walk into a court room and say we've agreed to how we want to divide things up. Now can you please make it legal Your Honor?

I think a consent decree is what I thought I was getting when I removed her as a beneficiary but of course it wasn't.
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Re: question about 401k division

Unread postby Trevor » Wed Nov 08, 2017 2:13 pm

A consent decree goes by many names in the states. You can probably google your local court and find a template for a consent decree, stipulated agreement, or whatever term is used locally for a document containing a mutually-agreed set of terms. There will probably be instructions for doing so. I would argue that you'd be wise to have a lawyer help you (note, I mean you, and not you and your STBX) to make sure the language is tight and that it's submitted correctly.
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