Can a non-designated spouse have claims to IRA assets?

Submitted by Kevin DeNardo on Mon, 2009-07-27 22:13

Wife designates 3 children as sole beneficiaries on beneficiary form. She leaves the “married” designation blank on the bene form.She and husband have strained relationship. She passes. Does husband have any claims to her IRA assets.
Thanks in advance
Kevin



Submitted by Alan Spross on Mon, 2009-07-27 22:37

Not directly. BUT:
If they reside in a community property state, the surviving spouse is entitled to 1/2 of the decedent’s community property assets. If this 50% cannot be satisfied using other assets, the survivor could seek court relief to acquire the interests, including the IRA interest. To pursue this, there would have to be a determination of how much of the decedent’s assets were actually community property rather than separate property.

Assets the deceased spouse inherited or received as gifts are separate property as are assets acquired prior to the marriage. However, if these separate assets are commingled with community property, then the determination gets difficult. Another complicating factor is moving from a common law state to a CP state that has specific provisions about “quasi” community property. Settlements have the potential for major complexity.

While a retirement account can only be registered in one name, a community property spouse actually has a vested interest in these accounts unless their 50% interest is not satisfied from other assets. In addition, any settlements typically factor in the tax adjusted value meaning that a Roth IRA is worth more than a traditional IRA or a NQ annuity of the same amount.



Submitted by Kevin DeNardo on Tue, 2009-07-28 01:04

You are worth your weight in gold.
much appraciated!



Submitted by Bruce Steiner on Tue, 2009-07-28 03:20

To make it even more complicated, community property is not determined the same way in all 9 1/2 community property states.



Submitted by Kevin DeNardo on Tue, 2009-07-28 18:03

There apparently was one additional fact that I was not aware of which may or may not change things. The Death Certificate presented to the custodian indicated that the deceased was married, but the beneficiary form did not have the marital portion filled in (so there was nothing on the form indicating whether the account primary beneficiary was married or un-married, as both choices were left blank); and there was no signature for the spousal waiver consenting to a designation of a death beneficiary other than a spouse.

I’m more focused on the potential liability of the Bank/Custodian, for failing to have the form completed properly in the first place and then not questioning the death beneficiary designation to a non-spouse (the beneficiaries were designated specifically as a child and grandchild); in light of the fact that the death certificate clearly states that the deceased was married.

Also, one more curious thing … the form used by the Bank Custodian states at the bottom of the marital status section that the primary beneficiary may be required to provide a new beneficiary form in the event of a change in marital status. I guess I find it troublesome if the form means nothing and there is no duty on the part of the custodian to question delivery to a non spouse beneficiary when the beneficiary form is not filled out properly, has no spousal waiver signature required by the non spouse beneficiary and the death certificate used to access the funds shows the decedent to be married.

Thanks in advance.



Submitted by Bruce Steiner on Tue, 2009-07-28 18:13

Why does the bank ask whether the IRA owner is married? Spouses have rights to qualified plan benefits under the Retirement Equity Act, but not IRAs. If the spouse has a community property interest, he/she can bring that in state court. Similarly, the spouse can claim an elective share in the probate court.



Submitted by Jose Morales on Tue, 2009-07-28 18:54

There is no requirement for a custodian to determine the marital status of a person opening an IRA account, even in community property states. The potential liability of the custodian for not having the person state their marital status on the application is very small, although I’m sure a good/ambitious lawyer will grasp at anything if the money is right.



Submitted by Alan Spross on Tue, 2009-07-28 18:58

What state is this? Is this a nationwide or large regional bank?
Does the form used indicate that it may apply to more than one type of retirement account, and/or is there any indication the wrong form was used?



Submitted by Kevin DeNardo on Tue, 2009-07-28 19:12

Thanks for replies. State is Illinois. Bank of America, I believe is custodian. Trying to clean up mess for new client.
I’m trying to get a copy of the form used. Will post when I get more – sorry I don’t have all my ducks in a row.



Submitted by Alan Spross on Tue, 2009-07-28 19:27

Since IL is a common law state, the prior comments about community property issues would not apply here.

Bruce, how does claiming an elective share of the probate estate effect non probate assets? Can the non probate asset valuations influence the amount of the probate estate that can be claimed?



Submitted by Bruce Steiner on Tue, 2009-07-28 19:38

I don’t know about Illinois, but in most states nonprobate assets are included in the base for calculating the elective share.

Again, I don’t know about Illinois, but once the amount of the elective share is calculated, in some states the recipients of nonprobate assets contribute pro rata to the elective share, while in other states the elective share is payable first out of probate assets.

Finally, if the couple lived in a community property state and moved to a common law state, the surviving spouse may still have be a community property claim against the deceased spouse’s estate or beneficiaries.

Caution: this is not legal advice. If this involves an actual case, the parties involved should consult with their own counsel, who can advise them based upon the particular facts and their objectives.



Submitted by Kevin DeNardo on Wed, 2009-07-29 13:37

Thanks for all the information – greatly appreciated gentlemen.



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