Community Property IRAs & Beneficiary Designations
Assuming that all contributions were earned and made by a spouse while the couple were married and lived in a community property state (in which they still reside), does the beneficiary designation or the community property classification take precendence in determining who inherits the IRA.
For Example:
Assuming the above facts, the wife has a $1mm IRA and designates their son as sole beneficiary, if she predeceases her husband would the $1mm go to the son, or only $500k (her half of the community property in the IRA)?
Permalink Submitted by Jose Morales on Wed, 2015-04-01 21:23
Most plan agreements have a section in their beneficiary designation area where a spouse is required to give consent to the naming of a primary beneficiary other than themselves. Assuming that the spouse did not give this consent in combination with the factors you laid out and then wanted to take legal action as a result upon the passing of their spouse, the odds are very good that in a community property state the spouse would be found to be entitled to 50% of the proceeds regardless of whether they were named the beneficiary or not. The IRA Custodian would most likely want to have a court order in hand before distributing the funds in a manner other than documented in their plan agreement with the IRA owner though. I wouldn’t expect them to make the decision of who gets what percentage of funds in the event of a dispute themselves.
Permalink Submitted by Alan - IRA critic on Wed, 2015-04-01 22:27
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