Spousal Rights and Non-Probate assets

Generally spousal claims apply to the probate estate which only includes assets that the decedent owned at death and which did not pass by operation of law or beneficiary designation or other contract provision.   Virginia expands the spousal protections to the “augmented” estate, the calculation of which includes certain non-probate assets and prior gifts.  A federal law known by the acronym ERISA protects spouses’ rights to certain retirement plans and accounts.  Often the vast majority of a decedent’s property passes outside of probate.

            For example, many spouses own the marital home and sometime other real property in a form of ownership called tenants by the entirety (“T by E”).  One of the characteristics of this tenancy is survivorship – if one tenant dies the other succeeds to ownership of the entire property by operation of law.  A Will cannot change this result.

            Often spouses hold bank accounts as joint tenants with right of survivorship (“JTWROS”) or name each other as pay on death (“POD”) beneficiaries of their financial accounts.  These arrangements can be changed by transferring the funds or changing the beneficiary.

            You can freely change the beneficiary designation on your IRA’s.  However 401(k) accounts are subject to ERISA spousal protections.  You cannot name a beneficiary other than your spouse without your spouse’s consent and if you name no beneficiary your spouse takes by default.  A spouse’s ERISA rights in 401(k) accounts, 403(b) accounts, pensions, etc. can be eliminated only by a final judgment of divorce, or completion and delivery of a beneficiary designation with spousal consent to the plan administrator.