Pension Spousal Rights if taken as lump sump

[ratsnej]

What is the name of your state (only U.S. law)? MD
My husband who is retiring wants to take his pension as a lump sum per advice from a financial planner who will then re-invest it under my husband's name. I have to sign and have notarized a form allowing this which makes me nervous, marriage isn't all that stable. If I include the statement: "by signing this form I do not relinquish any of my spousal rights to this pension amount," will I be covered in the event of a divorce?

 

[mistoffolees]

What is the name of your state (only U.S. law)? MD
My husband who is retiring wants to take his pension as a lump sum per advice from a financial planner who will then re-invest it under my husband's name. I have to sign and have notarized a form allowing this which makes me nervous, marriage isn't all that stable. If I include the statement: "by signing this form I do not relinquish any of my spousal rights to this pension amount," will I be covered in the event of a divorce?

Yes and no.

You will still be entitled to 1/2 of marital assets - including pension amounts. If he converts it to a different retirement fund, you're still entitled to 1/2 of the marital portion.

However, if he converts it to something else and then squanders it, you would be entitled to 1/2 of nothing. Furthermore, you very well might have to fight to prove that you're entitled to 1/2 if he puts it in his name (you'll need to be able to provide documents showing where it came from). Finally, once it's entirely in his name and control, there's the possibility that he could transfer it out of the country or whatever.

In addition, it is often a bad idea to convert a fixed pension to other assets, anyway (unless you think the pension is on shaky ground).

Frankly, there's little or no upside for you and a lot of potential downside. I would probably not sign it - or at least make sure you talk with an attorney and/or your own financial planner first. Perhaps you should suggest that you'll go along with it if half of the money is in his name and half in your name.

 

[LdiJ]

What is the name of your state (only U.S. law)? MD
My husband who is retiring wants to take his pension as a lump sum per advice from a financial planner who will then re-invest it under my husband's name. I have to sign and have notarized a form allowing this which makes me nervous, marriage isn't all that stable. If I include the statement: "by signing this form I do not relinquish any of my spousal rights to this pension amount," will I be covered in the event of a divorce?

I think this is a hugely bad idea unless the money is being rolled over into another retirement vehicle.

Your husband is going to have to pay tax on the lump sum, which will likely kick you into a higher tax bracket...and most likely the reinvestment would be a less secure investment as well.

I would refuse to sign it unless you and your husband get advice from a tax professional and talk to a couple of other financial planners before making a final decision.