Take care of your IRA beneficiaries – Monterey Herald


Question: My husband passed away last year. In the process of settling his estate, I contacted his IRA custodian to transfer his IRA to my account. I was completely surprised when they informed me that their IRA lists my mother-in-law as the primary beneficiary and me as the secondary beneficiary. Sadly, her mother passed away earlier this year. In this context, I have two questions: 1) Can my deceased husband name a primary beneficiary other than me (his wife) without my knowing it? 2) Now that my mother-in-law is also gone, do I still become an IRA beneficiary?

Reply: One of the most common and confusing estate planning mistakes is not keeping beneficiary designations for IRAs and pension plans up to date. It’s easy to see how it goes. People are busy, life throws a few curved balls at them and before you know it their heirs are tied in emotional knots as they grapple with all kinds of awkward and unpleasant questions. What was my deceased spouse or relative thinking? Did I do something wrong? Didn’t they love me like I thought they would? Wasn’t I a good spouse, a good son or a good daughter? These questions may seem absurd now, but after we die our actions, even unintentional ones, can have an amplified emotional impact on the lives of those who remain.

You can save your loved ones a lot of unnecessary anxiety with a little attention to a few details. It’s not difficult and it won’t take a long time, but it can bring a huge benefit to those you love. Simply call the financial institution that holds your IRA and ask them to tell you who your designated beneficiaries are. If you have a financial advisor, they can verify your IRA beneficiary designations for you. You should also send an email to your company’s HR department and ask them to tell you who is registered as the beneficiary of your company’s retirement plan. If you discover that the beneficiary designations are out of date, they will be able to help you correct them. Correcting an error in your beneficiary designation now will save your loved ones a lot of confusion, heartache and legal fees later. Now let’s go to your questions.

In a communal property state like California, each legal spouse is entitled to the property that both spouses own together. Community property includes income earned by spouses during their marriage and any income earned and saved in a retirement vehicle. Therefore, when a non-spouse is named as the primary beneficiary of an IRA or pension plan, the IRA custodian or plan administrator typically requires the non-beneficiary spouse to sign a waiver.

I am not a lawyer and this is not legal advice, but if you have not signed such a waiver, you may have a claim against the IRA’s assets. If your discussions with the IRA custodian aren’t going anywhere, you may need the help of a good lawyer. Look for someone with expertise in inheritance law or estate litigation.

One thing that might work against your claim is if the IRA was somehow considered separate property. For example, it could be separate property if the IRA was established and funded before your marriage. Again, this could become legally complex, so you can discuss this with a lawyer.

The fact that your mother-in-law is deceased probably does not affect your status as a secondary beneficiary. Since she died after your husband, if her primary beneficiary status is maintained, her estate still inherits your husband’s IRA.

Steven C. Merrell is a partner at Monterey Private Wealth Inc., an independent wealth management firm in Monterey. It welcomes your questions regarding investments, taxes, retirement or estate planning. Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA 93940 or e-mail them to [email protected]

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