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. What is a 401(k) rollover?

    Find out what a 401(k) rollover is, when you might want to roll over a 401(k) and whether a direct or indirect rollover is ...
  2. Are qualified pension plans taxable?

    The taxable portion of your pension or annuity payments is usually subject to federal income tax withholding, according to ...
  3. How do you withdraw money from your 401(k)?

    Deciding to take a withdraw from your 401k is not a decision that should be made lightly. However, for those who needs funds, ...
  4. Is it possible to obtain a loan from a qualified retirement plan?

    Read how loans are available for qualified retirement plans; most loans allow for $50,000 or 50% of the current vested value, ...
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 ...
comments powered by Disqus
Related Articles
  1. Top Financial Frights: Emergencies & ...
    Investing Basics

    Top Financial Frights: Emergencies & ...

  2. Steps To Retiring With A Reverse Mortgage
    Retirement

    Steps To Retiring With A Reverse Mortgage

  3. When Your Job Offers An Awful Retirement ...
    Retirement

    When Your Job Offers An Awful Retirement ...

  4. Top 5 Strategies To Pay For Elder Care
    Retirement

    Top 5 Strategies To Pay For Elder Care

  5. 5 Top Alternatives To A Reverse Mortgage
    Retirement

    5 Top Alternatives To A Reverse Mortgage

Trading Center