Dear Dan
What happens if the husband is married but names someone other than his still-living wife as the beneficiary? Will the wife or the beneficiary receive the IRA?
– Ellie
Hello Ellie
I am not a lawyer and do not provide legal advice. I will only write generalities here. We strongly recommend that you consult a competent estate planning attorney regarding these issues.
Generally, with an IRA, the person named as the beneficiary inherits the funds. This is done as an operation of law and regardless of what the deceased owner’s will or trust may say regarding the disposition of the asset. This same dynamic exists in other accounts where owners can designate beneficiaries, such as retirement plans, life insurance, and “return on death” accounts allowed in some states.
However, there are laws regarding what are called “elective shares.” Elective shares can give a surviving spouse the right to a portion of the deceased spouse’s estate. These statutes exist in separate property states. Community property conditions vary.
Selective share laws are in place to prevent someone from completely disinheriting a surviving spouse. There may be valid reasons why you do not want to leave funds directly to your surviving spouse. For example, a surviving spouse who marries with significant assets of their own may not need or want to inherit.
Perhaps the most common example of planned dissolution is a marriage in which at least one spouse has children from a previous relationship. This inheritance can be arranged to pass to such children immediately upon the death of the surviving spouse, or usually through a trust.
Despite what is called the Uniform Probate Code, elective stock laws vary widely from state to state. Not all types of assets are treated the same. The portion of an IRA that is available to a surviving spouse who is not named as a beneficiary through elective stock is spread all over the world.
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Dan Moisand is a financial planner. Moisand Fitzgerald Tamayo We serve clients nationwide from offices in Orlando, Melbourne, and Tampa, Florida. His comments are for informational purposes only and are not a substitute for personal advice. Talk to your advisor about what’s best for you.Some reader questions have been edited to help explain the subject matter.