IRA disposition in pourover will

[Guest ToddLC]

What happens to an IRA in the following situation:

Domicile is CA. Will is pourover. Trust is ABC for a married couple. First spouse dies. IRA is in name of survivor with decedent as beneficiary. IRA is community property. The RBD has been passed.

Does half of the IRA somehow get poured over to the trust?

-Todd

[Guest L337pwner5]

So the beneficiary dies but the individual in whose name the IRA is maintained is still living? If that's the case, the survivor's IRA is unaffected by the beneficiary's death, except that the survivor may want to name a new beneficiary. The fact that CA is a community property state does not affect the ownership of an IRA pursuant to IRC 408(g).

[Guest ToddLC]

I'm not saying that the ownership of the IRA changes. But I thought the decedent in CA had an interest equal to half the value of the IRA, assuming the IRA was completely funded during the marriage.

If what you say is correct, the decedent loses the IRA interest at time of death.

Thus the IRA interest is not part of the gross estate for estate tax purposes. It is also not part of the trust estate.

So potentially this changes the allocation of funds to the Survivor Trust with respect to the combination of the Marital and Family Trusts. It certainly has tax and probate consequences.

[J Simmons]

I agree with L337pwner5. Federal law dictates the ownership of the IRA.

The IRA interest is not part of the gross estate of the decedent. However, state law might give the decedent's estate a greater, offsetting share of the other community property assets since federal law allocates the entire IRA to the owner. Check California state law in regards to the division of the community property between the decedent's estate and the survivor.

[Guest ToddLC]

I agree with L337pwner5. Federal law dictates the ownership of the IRA.

The IRA interest is not part of the gross estate of the decedent. However, state law might give the decedent's estate a greater, offsetting share of the other community property assets since federal law allocates the entire IRA to the owner. Check California state law in regards to the division of the community property between the decedent's estate and the survivor.

I had the same thought. This does not work, however, when an offsetting share of other community property is not available.

Also, my understanding was that federal law only trumps state in the case of ERISA plans such as 401(k), not IRAs.

I think this (my question) comes down to how Boggs v. Boggs, as decided by the US Supreme Court in 1997, is interpreted. I can't believe the matter hasn't been clarified since. It must happen all the time.

[Guest L337pwner5]

ERISA does have notably broad preemption, but all federal law preempts all state law (as a general matter with an extreme number of exceptions and nuances) under the Supremacy Clause of the Constitution. The issue is particularly clear-cut where, as is the case with 26 USC 408(g), state law is expressly preempted by federal law. Focusing too much on ERISA's broad preemption can make us forget about the general rules of preemption that we (those of us who are attorneys, anyway) learned in law school.