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Prenuptial agreement can't waive qualified-plan spousal annuity.

Hurwitz, a participant in a qualified plan, died while still married to his third wife. The couple had signed a prenuptial agreement in which each spouse waived all fights to the other's property.

Generally, qualified retirement plans must provide for payment of a spousal survivor annuity. However, married participants can waive the right to the survivor annuity, but only if the spouse consents to the waiver.

After his father's death, Hurwitz's son Peter, who was named as the primary plan beneficiary, sued his stepmother to prevent the benefits being' paid to her. Peter asked the court for a determination that he was the sole beneficiary of the father's interest in the plan. He claimed his stepmother's signing of the prenuptial agreement was an effective consent to waive the spousal survivor annuity.

Result: For the stepmother. Under IRC section 417(a), relating to waivers of spousal annuities, she did not consent to waiver of the survivor annuity. Therefore, the plan must pay the annuity to her.

Section 417(a) contains the following requirements: (1) the spouse must consent in writing to the other spouse's waiver, (2) the election must designate a nonspouse beneficiary and (3) the spouse's consent must acknowledge the election's effect. Signing the prenuptial agreement did not fulfill any of these requirements.

Even if the prenuptial agreement had met the statute's requirements, the consent could not have been effective because the parties were not married at the time of the agreement. Section 417(a) says the waiver must be made by the spouse. The court relied on regulations section 1.401(a)-20, Q&A 28, which comes to the same conclusion.

* Peter Hurwitz v. Joan Lear Sher, DCNY (4/8/92).

Edited by Anne Wagenbrenner, JD, LLM, editor, AICPA client newsletters.
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Article Details
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:Aug 1, 1992
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