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 (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 Who is the Beneficiary of Your Account?)

This question was answered by Denise Appleby
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