Non-spouse beneficiary on son’s IRA
I just read an article on bankrate.com on bequeathing retirement savings that referenced Mr. Slott. This article says it’s necessary to get a spouse’s signature in order to leave an IRA to a non-spouse. This has given me cause for concern. For about five years, we funded an IRA for our son, our way of gifting off some of our estate and benefiting him in later years. He married last January. He knows nothing about this IRA (he was a minor when we opened it) and we didn’t plan to change the beneficiary to his wife because if something happens to him, since we funded it, we want the money to stay in our family. Is this impossible now that he’s married? If something happens to him, will the money automatically go to her, in the absence of her signature authorizing us as beneficiaries?
Permalink Submitted by Anonymous (not verified) on Fri, 2010-04-16 20:00
I think you are refering to “Spousal Consent” on naming or leaving a Qualified Retirement Plan (not IRA). An IRA is dictated by the contract you have with the custodian, where you are free to select any beneficiary without any consent from anyone.
So it depends who is selected as beneficiary now. If nobody is listed, the IRA Disclosure Agreement may have “spouse” as default. If he (you) named family members they will be in line to get it. I will admit that if a court order is submitted to the custodian that requires a payout to the spouse, they will probably honor it. Again that would mean, the spouse actually goes through with a legal challenge and wins. I am not an attorney, but the risk does exist in some common law states, so you may want to seek some professional advice.
pko
Permalink Submitted by Alan Spross on Fri, 2010-04-16 22:37
The other case where a spousal consent may be requested is in community property states. When community funds are used to fund an IRA, the IRA becomes community property meaning that the surviving spouse has a claim on those assets if they are left to someone else. The IRA custodian does not want to become involved in litigation over whether some of the funds may be needed to satisfy the community ownership issue.
I located that bankrate article, and the comment that a spousal waiver is required is not attributed to Ed. His name was mentioned in an earlier section of that article. The general statement made showing “retirement plans” should have stated employer plans so that IRAs would not be included in that statement.
Permalink Submitted by Cathy Bein on Sat, 2010-04-17 00:11
I didn’t mean it was Mr. Slott’s comments, just explaining why I came to this website to see if I could get an answer. I am familiar with him so I was pretty sure I would get a correct answer.
I re-looked at the article also. It’s a little confusing. It speaks of “retirement plan” and then “401K or IRA beneficiary.” I kind of took “retirement plan” generically, it not occurring to me that there would be a difference in a workplace plan and IRAs and Roths.
It’s cleared up now. Thank you!