Does an former spouse have rights to deceased person's IRA?

[katieinny]

An ex-spouse is listed as the beneficiary of her former spouse's IRA. If it were a qualified plan, that might be enough to assure that she receives at least some of the assets regardless of what the divorce decree says. But since it's an IRA, and the divorce decree says that the plaintiff and the defendant waives any interest in the other's retirement accounts of any nature, whether 401(k), IRA, 403(b) or defined benefit plan, I'm wondering if she has the ability to get any of that account. Does she have a chance?

[QDROphile]

What kind person, or what kind of extraordinary circumstances, are we dealing with when a property settlement expressly excludes an IRA interest and then a quetion is raised about whether or not she has a chance at getting the IRA?

[JanetM]

The divorce decree and property settlement just say she isn't entitled to any part of retirement funds at the time of divorce and QDRO will not be done. Since she is the named beneficiary she should get the account.

[katieinny]

Of course we're hoping JanetM is right. Is there a citation you can refer me to? The deceased's estate has many creditors standing in line. He has an ex-spouse and children who could certainly use the money.

[jpod]

I think we are all assuming that the beneficiary designation of the spouse was made prior to the property settlement. Resolution of the issue will be a question of state law. You will lots of cases dealing with this type of situation. The fact that it is an IRA rather than some other asset really is immaterial.

If this was a post-settlement beneficiary designation, seems to me it's about as close to a slam dunk as possible: ex-spouse gets the $$.

[JanetM]

Normally the IRA custodian looks at beneficiary form on file and doesn't look beyond that. Why would they question it, if it is valid form? Just because the person is divorced does not invalidate beneficiary forms. We see it all the time. Folks have change in family status and forget to change all the forms.

[jpod]

Believe me, if there is real money at stake the custodian will hear from the decedant's family in a situation like this, for its sake hopefully before it distributes any money.

[katieinny]

The beneficiary designation was filled out prior to the divorce and was not changed. The application for benefits asked for the "relationship to deceased." She entered "ex-spouse." Then the custodian said they needed to see the divorce decree, which she provided. Now the custodian says that since the divorce decree says that each party waives their right to each other's retirement assets, they have to pay the assets to the deceased's estate.

Under a qualified plan she would have the protection of ERISA, but since this is an IRA, I would like to find a citation that confirms our belief that the beneficiary form prevails.

[JanetM]

That is interesting. I am listed on my exhusbands IRA, TSP account, and life insurance. Or divorce decree says he keeps his accounts and I keep mine.

The ex spouse waived her right at the time of divorce. Don't see how that impacts the IRA holders choice to give it to her later.

[katieinny]

JanetM -- We agree with you. Now I've got to get the IRA custodian to come around. I don't know if logic will be enough.

[Appleby]

JanetM -- We agree with you. Now I've got to get the IRA custodian to come around. I don't know if logic will be enough.

A carefully worded letter will do the trick.

You are likely talking to the customer service/processing departments. Ask to speak with the legal department- and not just anyone there- but an attorney.

I agree with Janet too

[Guest mjb]

There are several important issues that need to be considered by counsel:

1. Does state law automatically disinherit ex spouse upon divorce. CA, WA and HI have such laws, most states on east coast do not. Although spouse may be disinherited only under divorce decree and not state law she may still inherit as default beneficiary under IRA (see 2).

2. Check the IRA agreement to find out what happens if a bene is disinherited. Is there a secondary beneficiary? Most IRAs provide that if there is no designated bene then the benefits will be paid in order to spouse or children before being paid to the estate of the owner. If she is removed as a bene under state law then the next in line, e.g childen, will inherit the benefits.

3. Check state law to see what are the rights of creditors after death of IRA owner. Some states (NY) provide that the rights of creditors of a IRA owner are terminated at death and bene takes assets clear of such claims.

4. The language of the divorce decree merely states that the spouse will not receive any benefits which can mean that she is not entitled to a division of his retirement benefits as her own benefits but not exclude her receiving his benefits upon his death asa bene. Need to check state law to see if there is precedent.

[BPickerCPA]

Custodian will not want to give IRA to wrong person, so they probably won't do anything until someone has a court decision.

The bottom line is that state law will control.

[Belgarath]

Is this where they do one of those "interpleader" things, or is that only where there is no established case law?

[katieinny]

mjb: I've been looking all morning for something under NYS law that says "rights of creditors of an IRA owner are terminated at death and bene takes assets clear of such claims." Can you point me in the right direction?

[Guest mjb]

See Estate of King, 196 Misc 2d 250, NY Surrogates's Ct.

[katieinny]

mjb: I forwarded the NY Surrogates Court case reference to an attorney to see if she could find it, but she says nothing comes up under that name and case number. Can you give it to me again?

[Guest mjb]

764 NYS2d 519. Its also cited in NY State bar association journal Feb 2006 at P 18.If you plug it in under the cite it comes up.

[katieinny]

Yup -- she found it and is faxing it over. Thanks for your help!