If you and your spouse have experienced marital troubles but are not yet ready to divorce, you may choose to enter into a legal separation agreement. Doing this may provide protections for you beyond simply choosing to live separately. However, even a legal separation agreement does not take care of all issues you will need to address. One topic that will require your attention is the beneficiary status on your and your spouse's retirement accounts.
According to the Internal Revenue Service, most married persons are eligible for full spousal death benefits of profit-sharing plans at 50 percent of spousal death benefits for others plans. This can be changed only when the spouse who is named on the plan waives the benefit and such waiver is approved by the other spouse. A legal separation removes the need for the non-participant spouse to approve the waiver.
However, filing the waiver is not the only thing a plan owner needs to do in order to prevent a separated spouse from being eligible for death benefits. In addition to the waiver, the participant must officially name a new beneficiary for the plan. Therefore, if you waive your spouse's death benefit right but fail to name a new beneficiary, your spouse will still be able to claim the death benefit should you die first.
This information is not intended to provide legal advice but is rather meant to give separated New Jersey residents important information about their retirement benefits if one spouse dies while still legally separated but not divorced.