Guest sgriff Posted November 21, 2000 Posted November 21, 2000 We have a client with a one person profit sharing plan. He has designated A (ex-spouse) as his beneficiary designation under the plan. Last year, he took almost all steps needed to terminate the plan,(did the resolutions etc.) However, he never filed a final 5500 and I do not think he transferred the assets from the plan to an IRA. He has now died, and his will gives everything to the new girlfriend. Question is will the wife under the almost terminated plan's beneficiary designation take the money or will the new girlfriend under the will take the money?
Guest Posted November 21, 2000 Posted November 21, 2000 General rule is that the designation of beneficiary controls distribution of plan assets. I do not understand almost terminated. Until assets are distributed the Trust is not terminated. similar to almost pregnant. Might argue under state law that designation is void pursuant to divorce. This is currently before U.S. Supreme Court.
Kirk Maldonado Posted November 21, 2000 Posted November 21, 2000 A bit of clarification of what b2kates said. Some state laws invalidate beneficiary designations upon divorce. Kirk Maldonado
Guest sgriff Posted November 21, 2000 Posted November 21, 2000 One additional piece of info, I think that in addition to the ex-spouse, the deceased son was also a beneficiary under the plan. So, if the state law invalidates the spouse designiation upon divorce, this law would have no effect on the son's status as beneficiary. . . so I guess he would now be sole beneficiary.
Guest sgriff Posted November 21, 2000 Posted November 21, 2000 Sorry, let me rephrase, "deceased's son" not "deceased son"
KIP KRAUS Posted November 21, 2000 Posted November 21, 2000 I would agree with Kirk that a state could invalidate an ex-spose beneficiary designation after divorce. However if the ex-spouse was designated as beneficiary after the divorce (stranger things have happened, maybe a guilty feeling)I'd say it is valid and I would argue that in that case a state court could not invalidate it.
Guest sgriff Posted November 21, 2000 Posted November 21, 2000 Thanks to all of you for your help. I have not been able to find anything in NY law that states an ex-spouse is disqualified. . . but still looking. As to the plan termination issue, you are right, since the plan assets have not been distributed during the past year, it is treated as an ongoing plan. Thus, the named beneficiaries under the plan should control in this case. Thanks again!
david rigby Posted November 21, 2000 Posted November 21, 2000 It is also possible that the ex-spouse was designated as beneficiary IN the divorce, not after. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
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