What will my ex’s pension mean to me if I need a nursing home?

What will my ex’s pension mean to me if I need a nursing home?

Q. My ex-husband worked for a company that says when he dies, his retirement account would go to me, his wife. Now that we are divorced, the company says I would still get the retirement check every month after his death. He wants me to deposit this check into his daughter’s checking account. Is there a problem or issue with this? I don’t mind turning over the money since we are divorced, but I don’t know if that financially messes things up with my income if I were to go to a nursing home. He wants me to sign something saying I will pass the check to his daughter, and then she would be responsible for any taxes.

— Unsure

A. As part of every divorce, assets and debts acquired during the marriage are to be equitably distributed.

Any asset or debt needs to be identified, valued and then divided fairly.

If your ex-husband acquired a pension during your marriage, when you divorced, you were entitled to receive a share of the marital portion of that pension, said Jeralyn Lawrence, a family law attorney with Lawrence Law in Watchung.

If that occurred, and the pension was divided following your divorce via a Qualified Domestic Relations Order, or QDRO, for short, she said.

“When the pension goes into pay status and checks are sent from the plan administrator, those checks that are sent to you represent your share of the pension and are yours to keep,” Lawrence said. “If, however, as part of your settlement agreement, you waived your rights to your share of his pension in exchange for receiving other assets, the pension would be his to keep without distribution to you.”

Alternatively, if your settlement agreement provides that you are to receive a portion of the pension and you did not have a QDRO prepared or are unsure, you may not receive a portion of the pension directly from the pension plan because the administrator may not have been notified, she said.

“It is imperative that you revisit the documents prepared following the entry of your final judgment of divorce to determine if a QDRO exists and/or was submitted to the plan, she said.

Your inquiry appears to assume that the pension plan directs 100% of your ex-husband’s pension to go to you upon his passing, pursuant to the terms of the pension plan itself, as you were his spouse at the time of issue.

Lawrence said this should be verified by reviewing the pension plan’s summary plan description to determine if a QDRO is necessary to facilitate the distribution of the pension upon your ex-spouse’s passing and to confirm that the pension does not terminate upon death, which is not an uncommon provision for pensions.

Lawrence said if and when these payments are made to you, you are within your right to allocate them at your discretion, absent a written agreement between you and your ex-spouse to the contrary. That would include depositing them into an account established for the benefit of his daughter, if that is how you choose to distribute these funds that would otherwise be yours.

“However, it is still likely you will pay the income taxes on any distribution, as they would be received in your name as income to you,” she said. “It would be problematic for you to sign the document he is providing you as that document does not ensure the continued receipt of the pension nor is that document binding on the pension plan administrator.”

It also does not preclude the IRS and/or state authorities from coming after you if you do not claim the pension as income on your income tax returns and does not indemnify you or hold you harmless from any penalty that the IRS and State authorities could impose on you for failing to claim income on your tax returns, she said.

Notably, she said, a QDRO can also act to distribute a portion of a retirement asset to a dependent of the participant in the form of child support.

It is unclear from your inquiry as to whether your ex-husband would have a child support obligation to his daughter at this time or if she is emancipated.

“If he does have a child support obligation to his daughter, and this is the manner in which he wishes to pay same, to which you are in agreement, a QDRO may have to be prepared to direct future child support payments to his daughter,” she said. “However, it is highly recommended that you speak with an experienced family law attorney to review your settlement agreement to determine what portion, if any, of this pension would be yours, and to review the summary plan description to understand how and under what circumstances the pension can be distributed.”

If the income is yours, it could have big impacts on qualifications for Medicaid, to which you might turn should you need nursing home care. That’s another important reasons to speak to an attorney to make sure your needs are protected.

Email your questions to [email protected].

Karin Price Mueller writes the Bamboozled 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 e-newsletter.

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