Divorce does not usually change a beneficiary designation unless the divorce decree makes a stipulation to change it. By addressing the issue of IRAs as part of a divorce, it is possible to avoid surprise transfers to an ex-spouse after a death.

Do Erisa rules apply to IRAs?

Retirement accounts that qualify under ERISA are, in general, protected from creditors. ERISA can cover both defined-benefit and defined-contribution plans offered by employers. In addition, ERISA laws don’t apply to Simplified employee pensions (SEPs) or, as mentioned above, IRAs.

Are there any IRAS that are not under ERISA?

IRA accounts initiated by individuals do not fall under ERISA’s provisions, but certain IRAs that employers sponsor do. These include SEP IRAs, SIMPLE IRAs and rollovers from ERISA plans.

Who is rightful beneficiary of ERISA after divorce?

The daughter argued that the funds should be distributed to the estate in accordance with the employee’s will because of a state statute that revoked the former spouse’s interest in the funds upon divorce. The former spouse countered that ERISA preempts the state statute, making her, as the named beneficiary, the rightful recipient of the funds.

What’s the difference between ERISA and non-ERISA retirement accounts?

ERISA qualified retirement plans enjoy a higher level of creditor protection than non-ERISA plans. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, IRA accounts are protected up to more than $1 million. However, outside of bankruptcy where BAPCPA does not apply, IRA accounts are subject to the applicable state law.

How is state law related to ERISA plan?

The court determined that the state law at issue here “related to” an ERISA plan in that it required the plan administrator to look to state law to determine the recipient of plan payments, rather than to the plan itself.