Community Property States and second marriages
A 42 year old widow with 3 kids in California (community property state) marries a divorced man with two children who is a resident of Nevada (community property state). The widow wants to maintain all of her assets (qualified and non-qualified) in her name alone so that her three children will receive the wealth that was built by their father. There were no pre-nup agreements. Are all assets of both new spouses automatically owned 50/50? The widow’s deceased husband had two 401k plans that were transferred into IRA R/0s after his death with the kids listed as beneficiaries. Do these escape the problem of community property assets?
Permalink Submitted by Alan - IRA critic on Thu, 2013-02-28 23:25
Yes, subject to two requirements:1) The IRA custodian when aware of the marriage will want the new spouse to sign a waiver of being the IRA beneficiary. The custodian does not want to be involved in a potential community property claim against the IRA assets.2) To further protect against litigation, the new spouse should sign an agreement that waives his interest in the IRA values including growth after marriage, Even though the IRA custodian will pay the death benefits to the children, this will protect against the IRA values being considered part of the community property with respect to dividing up the other non IRA interests. If the widow cannot get this waiver signed, a lesser compromise would be to make copies of the IRA statements immediately before the marriage that would establish the pre marriage valuation.
Permalink Submitted by Bruce Steiner on Fri, 2013-03-01 03:10
Community property is not the same in all 9 1/2 community property states. The income from separate property is separate property in some community property states, but is community property in other community property states. You’ll have to determine which state is the applicable one, and then check to see how it works in that state.
Permalink Submitted by Eric Smith on Tue, 2014-06-24 23:15
Does anyone have code or case citations to show that an inherited IRA in California is definitely community property and therefore a spouse would not need to consent to husband naming other beneficiaries on that purely separate property beneficiary IRA? I believe this is correct and haven’t seen anything in Federal law that conflicts, but how could I convince an unwilling IRA custodian to waive what their form asks for (spousal consent) in order to name another IRA beneficiary? Maybe there no reason to tilt at that windmill when other custodians do not require this…but I also need to convince the client that I am correct and the IRA custodian is trying to make them jump through an unnecessary hoop when they do not want to do so for sensitive reasons. Thanks.
Permalink Submitted by Alan - IRA critic on Tue, 2014-06-24 23:30
I think your first sentence intended to indicate that an inherited IRA is NOT community property, and that is indeed the case. All inherited property is individual property. The custodian needs to check into this further.
Permalink Submitted by Eric Smith on Wed, 2014-06-25 18:28
Alan–Correct I did mean NOT community property.