Who Is the Rightful Beneficiary When the Last Marriage Wasn’t Legitimate Because a Prior Divorce Wasn’t Finalized?

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Question: My Father-in-law passed away in July of 2012. He retired from the railroad, was ‘married’ four times, and has 5 children. He was married to wife #2 in Indiana (she mothered 3 of his children) and filed for divorce in 1989 (not 100% sure that was the year) then ‘remarried’ 2xs after. 10 months before his passing he moved out of the home that he & wife #4 shared. He had a will stating that all his assets were to go to his 5 children (he did not father any children with wives 3 & 4) but had wife #4 as beneficiary on all of his accounts (retirement, life insurance etc..) Well wife #2 filed for a portion of his retirement benefits, and it turns out that she & father-in-law were never legally divorced (which is why the quotes around “married” above for wives 3 and 4). The railroad recognizes wife #2 as his legal spouse and has taken wife #4’s name off of his benefits. I’m not 100% sure where a majority of his benefits are, but I do know his total assets amount to approx $3.5million. Before Father-in-law passed he stated that all of his money was in stocks & bonds – I do know that the railroad offered him a lot of stock as part of his retirement, is this counted as his retirement benefits from the railroad or would this be in an investor account? My main question is what options does wife #2 have in making sure that wife #4 does not get anything except the vehicles they shared (both names on title with survivorship listed) . Sorry this is so long winded and complicated. It’s been a nightmare for my husband & his siblings.

Answer: It depends, so you’ve got some detective work to do. And not the exciting cloak-and-dagger detective work, but the phone calls and paperwork kind.

The first question is where were the assets held? What an asset is (stocks, bonds, whatever) doesn’t determine whether it is a retirement asset or not. It’s the type of account it is in that determines that.

The second question is whether your father-in-law had the authority to name a beneficiary (Wife #4) without the permission of his wife (Wife #2). Again, that will depend on the type of account and on the account holders. It appears that the railroad has already taken the position that he did not. Other account holders might agree, or they might not (this is, after all, a somewhat unusual scenario).

Keep in mind that, as a general matter, you can name who you like as a beneficiary of most accounts. For retirement accounts and life insurance, however, there are rules limiting your free designation of a beneficiary, and that’s where you have the wedge to overturn your father-in-law’s stated beneficiary designation.

Ultimately, if there’s enough money involved, litigation is an option. I’d try to avoid it if possible, as it tends to eat up the money you’re fighting over, but it’s always a final option if the account holder doesn’t agree.