State laws vary in how IRA assets are treated upon the death of an IRA owner. Several states have rules on their books to ensure that surviving spouses get a fair portion of the assets from their deceased spouse's estate. These rules can supersede any beneficiary designations you make, and can also create headaches for your loved ones as they manage your estate after your death.
For example, in New York and Florida, surviving spouses are entitled to receive an 'elective share' of their deceased spouse's assets. In Florida, the elective share amount is 30% of the value of the estate, including IRA assets. The payment does not necessarily have to come from the IRA. However, if IRA assets make up most of the estate, the surviving spouse may be entitled to assets from the IRA, even if the spouse is not named as a beneficiary on the account.
In New York, the law is somewhat different. The elective share that surviving spouses are entitled to equals one-third of the deceased spouse's estate, including IRA assets. However, if beneficiaries were named to an IRA before September 1, 1992, IRA assets can be excluded from the elective share calculation.
In a handful of states, assets acquired by a married couple while they are married are considered 'community property.' Upon the death one spouse, the surviving spouse is entitled to one-half of the couple's joint assets, even if a will or any beneficiary designations specify otherwise.
One outcome you do not want is for the state court to decide how to distribute the assets in your estate. Make sure that your beneficiary designations are current on all of your IRA accounts, and keep in mind what share of your estate is required to pass to your spouse.
An advisor can help you review your current beneficiary designations to help you ensure that they are consistent with your intentions. An advisor can also give you the names of several local attorneys who are familiar with state IRA beneficiary laws.
Source: Kiplinger's Retirement Report, October 2004, IRAs and State Laws
Securities and Investment advisory services offered through Capital Analysts Incorporated Member NASD; SIPC.
State laws vary in how IRA assets are treated upon the death of an IRA owner. Several states have rules on their books to ensure that surviving spouses get a fair portion of the assets from their deceased spouse's estate. These rules can supersede any beneficiary designations you make, and can also create headaches for your loved ones as they manage your estate after your death.
