Common law spouses not necessarily entitled to pension benefits
A recent court decision has created new worries for the 'married but not yet divorced' set.
The case in question involved a man who died prior to retirement, leaving behind both his long-time common law spouse, with whom he was living at the time of his death, and his first wife, to whom he was still legally married even though they lived apart.
The question was who should receive the man’s pension death benefit: his common law wife, his legal spouse or his designated beneficiaries?
Prior to the decision, it was common for pension administrators to advise plan members that common law spouses who were living with a plan member at the date of death were first in line to receive pre-retirement death benefits and that there was no need to designate the more recent partner as beneficiary.
But that seems to have changed. The court held that the common law spouse wasn't entitled to the pre-retirement pension death benefit from her deceased partner’s pension. You can read the court's rationale here.
While the case was expected to be appealed, it's now clear that's not going to happen.
The bottom line: If you’re in a pension plan and you have a common law spouse, you should probably meet with your human resources people to make sure your benefits go to the person you had in mind.
Does this decision make sense to you? Have you encountered problems with pensions and estates? Were things resolved satisfactorily?
By Gordon Powers, MSN Money