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Spousal Rights to Inherit Qualified Retirement Plans in Illinois: 401(k)s, IRAs, and Pensions

Article written by Illinois & Iowa Attorney Kevin O'Flaherty
Updated on
December 20, 2019

In this article, we address, “spousal rights under qualified retirement plans.” Our Illinois financial attorneys answer:

  • What are spousal rights?
  • What are spousal rights for 401(k) accounts in Illinois?
  • Does a spouse have to be named as a beneficiary on a 401(k) account in Illinois?
  • What are spousal rights for IRA accounts in Illinois?
  • Does divorce protect your retirement accounts from an ex-spouse in Illinois?

What Are Spousal Rights?

Spousal rights, or marital rights, recognize a person’s legal right to inherit property upon the death of their spouse, right to sue for wrongful death of their spouse, and the right to receive a spouse’s pension, worker’s compensation, disability, or Social Security benefits. Spousal rights vary by state but when it comes to spousal rights under qualified retirement plans, there are several federal regulations to be aware of as well.

What Are Spousal Rights for 401(k) Accounts in Illinois?

401(k) plans are qualified retirement plans, meaning that they meet certain IRS rules and qualify for federal tax benefits. This gives the federal government the right to govern how funds are dispersed after the owner of the account passes.

A surviving spouse will always have the right to inherit all money in a 401(k) account. The only exception is if the surviving spouse signs a waiver allowing the account owner to name a different beneficiary. It’s important to note that a waiver must be signed when a couple is married. This means that prenuptial agreements do not protect retirement accounts as they are signed before a marriage is legally valid.

Does a Spouse Have to Be Named as a Beneficiary on a 401(k) Account in Illinois?

No, a spouse does not have to be named as a beneficiary on a 401(k) account in Illinois. They automatically have the right to inherit the funds. However, if you are the owner of a 401(k) account, naming your spouse as the beneficiary can speed up the distribution process should you pass away before your spouse.

What Are Spousal Rights for IRA Accounts in Illinois?

Unlike 401(k) accounts, funds from an IRA are not automatically inherited by a surviving spouse. The account owner has a right to name a different beneficiary but there are certain limitations. 

For example, community property states maintain that all retirement account funds are equally owned by a couple. Illinois is not a community property state but this is important to keep in mind if you’re planning a move to Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin.

What Are Spousal Rights for Pension Plans in Illinois?

Spousal rights for pension plans in Illinois depend on whether the participant passed before or after retirement. If a participant passes away before beginning to draw benefits from a pension plan, the plan must provide the spouse with a Qualified Pre-retirement Survivor Annuity. But if the participant passes away after starting to receive benefits from their pension plan, a Qualified Joint and Survivor Annuity equal to 50% of the participant’s benefits will be awarded to the surviving spouse.

Does Divorce Protect Your Retirement Accounts from An Ex-Spouse in Illinois?

A divorce decree does not automatically protect retirement accounts from ex-spouses. If their name is still listed as a beneficiary on a retirement benefit, they could still end up inheriting or being able to legally claim retirement funds after the account/plan owner’s passing.

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What Are Spousal Rights?

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