Dear Dan,
What if a husband is married but names someone other than his still living wife as beneficiary? Who gets the IRA, wife or beneficiary?
– Ellie
Hi Ellie,
Keep in mind, I am not a lawyer and do not give legal advice. I write only of generalities here. I highly recommend you consult with a competent estate planning attorney on these matters.
Generally, for IRAs, the person(s) named beneficiary inherits the funds. This happens as an operation of law and happens regardless of what the deceased owner’s will or trust may say about the disposition of assets. This same dynamic exists with other accounts that allow the owner to name a beneficiary such as retirement plans, life insurance, and oft-called “Transfer on Death” accounts allowed in some states.
However, there are laws regarding something called an “elective share.” An elective share can give a surviving spouse rights to some portion of a deceased spouse’s estate. These statutes exist in separate property states. Community property states are different.
Elective share statutes are in place to keep someone from completely disinheriting a surviving spouse. There are legitimate reasons a person may not want to leave funds directly to a surviving spouse. For instance, a surviving spouse that comes to a marriage with substantial assets of their own may not need or want to inherit.
Perhaps the most common example of a planned disinheritance is a marriage in which at least one spouse has children from a prior relationship. This inheritance can be arranged to go to such children immediately or, typically via a trust, after the surviving spouse’s death.
Despite a thing called the Uniform Probate Code, elective share statutes vary widely from state to state. They do not treat all types of assets the same. The portion of an IRA that a surviving spouse not named as beneficiary may get via an elective share are all over the map.
If you have a question for Dan, please email him with ‘MarketWatch Q&A’ on the subject line.
Dan Moisand is a financial planner at Moisand Fitzgerald Tamayo serving clients nationwide from offices in Orlando, Melbourne, and Tampa Florida. His comments are for informational purposes only and are not a substitute for personalized advice. Consult your adviser about what is best for you. Some reader questions are edited to aid the presentation of the subject matter.
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