Dear Liz: My husband’s parents were married for 11 years. They divorced at 32 and my mother-in-law remarried at 42. My mother-in-law and her ex are now 82. Her husband is 93 and in poor health. If her husband dies, she will not receive his pension. Her current Social Security benefit is $850 per month. Her husband receives $1,200, while my father-in-law’s allowance is $2,500 per month. She is confident that when her current husband passes away, she will be eligible for her ex-husband’s $2,500 benefit. I think that only happens if her ex dies, but she can get 50% while he’s alive. What is right?
Answers: You’re right.
People may be eligible for benefits from ex-spouses’ employment records if the marriage has lasted at least 10 years.
While the ex is alive, your mother-in-law may be eligible for divorced spousal benefits up to 50% of their full retirement age benefits, but only if she is currently unmarried. If her ex dies, she may be eligible for a survivor benefit of up to 100% of the benefit he received, but only if she is widowed or divorced. (People can receive divorced survivor benefits while married, but only if they were married at age 60 or later.)
She would only receive benefits based on her ex’s work record if the check is greater than her own.
The different rules for divorced spousal versus divorced survivor benefits can be complicated, so it’s not surprising she’s confused. Let’s use the numbers you provided to make this a bit clearer.
If she is widowed and her ex is still alive, she would get a $1,250 survivor benefit because it is (slightly) higher than her husband’s $1,200 survivor benefit on file. (Her $850 out-of-pocket benefit would essentially disappear, so her household income would drop quite dramatically from $2,050 plus the pension to $1,250.)
If her ex later died, she would be eligible for a $2,500 survivor benefit (or whatever the ex was receiving at the time of his death).
There are some caveats here.
Divorced spouse benefits are based on the ex’s “primary insurance amount,” or what he would receive at full retirement age. For someone born in 1940 that was 65 years and six months. Your mother-in-law would not qualify for deferred retirement benefits that her ex may have earned by delaying his application beyond his full retirement age.
On the other hand, she wouldn’t be penalized if he started taking his benefits before full retirement age. The bottom line is that her divorced spousal allowance could be anything more or less than 50% of what he currently receives, depending on when he signed up.
Survivor and divorced survivor benefits, on the other hand, are based on what a person actually received when they died. An early start can hinder those benefits, while a later start can increase them.
So is regular survivor benefits, and why it’s so important for the highest earner in a married couple to delay filing for as long as possible. The greater benefit can really help when the first spouse passes away and one of the couple’s two checks ends.
Your mother-in-law’s financial prospects were made even worse by the decision to get a “single life” retirement payout instead of a “joint and survivor” option. The joint and dependents option would have meant you accepted a smaller payment, but it would have lasted your mother-in-law’s life rather than ending with her husband’s death.
A married worker cannot choose the single life option without the consent of the spouse, and spouses would do well to consult a pay-only financial planner before agreeing to give up a lifetime income stream.
Authorized credit card users
Dear Liz: Following your advice on building credit, we recently added our son as an authorized user on one of my credit cards. My question is, what happens if I die? Does the card stay with him as the only user? Do I have to arrange this in my will?
Answers: Your executor, the person you have designated in your will to handle your estate, is responsible for closing the account when you die. If there are still outstanding amounts, the debt will be paid from your estate. There is no need to include special provisions for the account in your will. By then, one would hope, your son would have his own cards, so the closure wouldn’t affect his credit scores much, if at all.
Certified Financial Planner Liz Weston is a personal finance columnist for NerdWallet. Questions can be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact Us” form on asklizweston.com.