Q. My ex-husband passed away in December 2020 and I am now receiving his social security and pension. I gave his employer a copy of his death certificate to see about his life insurance, which should have had me as the primary beneficiary based on your divorce agreement. Also, they said my pension payments end in the month of his death because the QDRO doesn’t say anything about what happens to his pension when he dies. How do I know if it’s fair?
A. You should speak to a lawyer who can review your divorce agreement and advise you based on your specific situation.
But here are a few issues you need to understand when getting started.
You said you have a marriage settlement agreement and a Qualified Family Relations Order (QDRO).
This documentation should explain what you are entitled to in the event of a divorce, said Amber Leach, a certified divorce financial analyst at AXA Advisors / RICH Planning Group in Morristown.
Hopefully this addresses what happens after her death, but not always, she said.
“Even if something is stipulated in the marriage settlement agreement, it can take months for the process of a QDRO and an actual transfer of assets or changes in beneficiaries will even take place, âLeach said.
The terms of the agreement aren’t always enforced after divorce either, she said, so it’s important to stay on top of the terms and make sure they’re enforced.
âUnfortunately, it is more common than you might think that beneficiaries are not changed by agreement and premature death exposes this fact,â she said.
If you are to remain the primary beneficiary of a life insurance policy, it is important that you are aware of any changes to the policy over time, she said.
“If you are not the owner, you can ensure that you are informed of any change of beneficiary, any interruption of premium payments or a possible interruption of coverage by means of a letter of instructions. to the insurance company, âshe said. âThis is for your protection. “
As for retirement, the QDRO was created under the supervision of the plan administrator. The plan administrator approves the terms of the QDRO and ensures they are in line with what the pension plan offers, she said.
âYou cannot pay an annuity in a form that is not provided for in the plan. No lump sum payment is made if a pension does not offer a lump sum option, âshe said. âThis is why the approval of the plan administrator in the process of a QDRO is so important. “
Another factor that could be part of your scenario is the choice of payment option which was made at the time of retirement.
When the employee chooses their pension, they can choose any payment option provided by the plan, Leach said. These options may include term-based payments, a lifetime annuity only, or a joint life annuity.
âIf the surviving spouse option is chosen, the pension payments are less than life only, but they last until the death of the surviving spouse. The cost of this option is built into the lower pension payment, âshe said. âWe analyze the cost of this option to clients every day – the cost of life insurance versus choosing a surviving spouse. If the cost of life insurance is less than the reduction in payment, then it may be a good idea to choose the individual life insurance option and consider purchasing life insurance instead.
If his pension payments were based purely on his life, only then would the payments stop when he died, Leach said.
Again, you should contact a lawyer and the plan administrator for ultimate clarification. Good luck.
Email your questions to [email protected].
Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com‘s weekly electronic newsletter.