My uncle died recently. He designated my mother and father as his beneficiaries in 1997, after his divorce, and did not make any changes after he remarried in 2000. My uncle's current spouse is now fighting for money from the plan. Does she have a leg t

By Denise Appleby AAA
A:

It depends. If the retirement plan is a qualified plan, then the plan administrator would refer to the plan document to determine who the designated beneficiary is. The plan document explains the rules to which the qualified plan is subjected. Generally, qualified plans provide that the surviving spouse of the deceased is the beneficiary unless the surviving spouse signed a waiver allowing otherwise.

If the retirement plan is an IRA, the following scenarios could apply in your case:

  • If your uncle did not live in a community or marital property state (<?xml:namespace prefix = st1 /?>Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), it is very likely that the designation of your parents will stand and they will be treated as the beneficiaries.
  • If your uncle lived in a community or marital property state, your parents may still be the beneficiaries of the IRA if the IRA assets were accrued before he married his surviving spouse.
  • If your uncle lived in a community or marital property state, the spouse may be treated as the beneficiary of at least 50% of the amount that was accrued during the marriage. Community property laws would determine the definition of community property and the percentage to which she is entitled as beneficiary.

Your parents should check with the plan administrator (if the account is a qualified plan account) or the financial services institution if the account is an IRA .

If the amount is significant, it may be worthwhile to enlist the services of an attorney.

(To learn more about beneficiary designations, see Problematic Beneficiary Designations – Part 1, Problematic Beneficiary Designations – Part 2 and ?)

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS

  1. How do deferred tax assets help in meeting retirement goals?

    Learn how tax deferred assets can help individuals achieve long-term financial goals such as retirement and how they differ ...
  2. What are the best ways to pay less income tax?

    Learn about reducing your income tax burden by contributing to an employer-sponsored retirement plan or IRA, and see what ...
  3. Who does Warren Buffett plan to bequeath his estate to?

    Find out how much Warren Buffett is leaving for his heirs and how he wants the funds invested after his death. Learn about ...
  4. What are the most common deferred tax assets used by individuals?

    Use these deferred tax assets to reduce your tax liability and grow your assets simultaneously. Discover the most common ...
RELATED TERMS
  1. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  2. Gold IRA

    Definition of Gold IRA
  3. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  4. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
  5. Peri-Retirement

    A term for the period of time leading up to actual retirement. ...
  6. MyRA

    A new tax-advantaged retirement account that President Barack ...

You May Also Like

Related Articles
  1. Professionals

    Why Retirement Advice Is Better But ...

  2. Professionals

    Coming Soon: Private Equity In 401(k) ...

  3. Professionals

    Ways To Cut 401(k) Expenses

  4. Professionals

    Tread Carefully With Retirement Plan ...

  5. Professionals

    Required Minimum Distributions: A Reminder

Trading Center