19 Oct My ex died. Can I take over his pension benefits?

Q. My ex-husband passed in December 2020 and I get his Social Security now and his 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 ended the month he died because the QDRO says nothing about what happens to his pension when he dies. How can I find out if this is right?
— Divorced

A. You should speak to an attorney who can review your divorce agreement and advise you based on your specific situation.

But here are some issues you should understand as you get started.

You said you have a marital settlement agreement and a Qualified Domestic Relations Order (QDRO).

This documentation should explain what you are entitled to in the divorce, said Amber Leach, a certified divorce financial analyst with AXA Advisors/R.I.C.H. Planning Group in Morristown.

Hopefully, it addresses what happens upon his death, but not always, she said.

“Even if something is stipulated in the marital settlement agreement, it can take months for the process of a QDRO and an actual transfer of assets or beneficiary changes to even take place,” Leach said.

The terms of the agreement are not always executed after the divorce, either, she said, so it’s important to stay on top of the terms and make sure they are executed.

“It is unfortunately more common than you think that beneficiaries do not get changed according to an agreement and an early death exposes this fact,” she said.

If you are to stay as the primary beneficiary on a life insurance policy, it is important that you are notified of any changes to the policy as time goes on, she said.

“If you are not the owner, then through a letter of instruction to the insurance company, you can make sure that you are notified of any changes of beneficiary, any lapse in premium payments, or potential lapse in coverage,” she said. “This is for your protection.”

As to the pension, the QDRO was created with oversight from the plan administrator. The plan administrator approves the terms of the QDRO and makes sure they are in line with what the pension plan offers, she said.

“You cannot make a pension pay out in a form that is not provided for by the plan. No lump sum payment is happening if a pension does not offer a lump sum option,” she said. “This is why the plan administrator’s approval in the process of a QDRO is so important.”

Another factor that could be part of your scenario is the choice of payout option that was made at the time of retirement.

When the employee elects his pension, they may choose any payout option provided by the plan, Leach said. These options can include payments based on a term certain, a life only annuity or joint and survivor annuity.

“If the joint survivor option is elected then the pension payments are lower than life only but they last until the death of the joint survivor. The cost for this option is embedded in the lower pension payment,” she said. “We analyze the cost of this option every day for clients — the cost of life insurance versus the election of joint survivor. If the cost of life insurance is less than the reduction in payment, then it can make sense to choose the single life option and consider the purchase of life insurance instead.”

If his pension payments were based only on his life, only then payments stop at his death, Leach said.

Again, you should contact an attorney and the plan administrator for the ultimate clarification. Good luck.

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This story was originally published on Oct. 19, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.