[WSBAPT] IRA/community property/probate question

[Eric Nelsen]

One could argue that it's an all-or-nothing proposition hinging on the validity of the beneficiary designation form. If the form isn't valid because the surviving spouse didn't sign, then I think the IRA defaults to paying to the estate (for most custodians, anyway). If the form is otherwise valid but simply ineffective as to half the CP, then the decedent's POD designation on the IRA should be honored as to the decedent's property interest, which is all the SP and half the CP. In your scenario, assuming 15% SP and 85% CP is provable, then 57.5% should go to daughter (15% + 42.5%) and 42.5% to surviving spouse.

Since the designation form is a non-testamentary instrument, it needs to meet the IRA custodian's requirements. So maybe the form isn't valid at all, and therefore the IRA should be distributed under the custodian's default provisions.

I agree that RCW 26.16.030(1) says, literally only "devise or bequeath." But without doing actual research, my gut tells me that the statute would be treated as a more general prohibition on disposition at death of more than one-half of the community property, and so also permits POD designations of up to one-half of CP to persons other than the surviving spouse.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040



From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Dale Young
Sent: Friday, January 09, 2015 2:35 PM
To: wsbapt at LISTS.WSBARPPT.COM
Subject: [WSBAPT] IRA/community property/probate question

Listmates, here's one to get you reaching for your old copy of  Harry Cross' Community Property law review article.

It's the classic stepmother vs. child from the first marriage.

Client is named as beneficiary of her recently deceased father's IRA account (incidentally she is also named as the PR in his will and is
his sole heir in the will to all of this property).

The father's surviving spouse (the client's stepmother) is also claiming the entire IRA account.

The IRA was opened after his marriage to the stepmother, but the source of the funds can be traced to reveal it was about 15% separate funds and 85% community funds.  (by the way the funds came from an 40lk rolled over into the IRA, which 40lk was 85%/15% community vs. separate funds)

The IRA beneficiary form says if a community property state is involved then the form naming someone other than surviving spouse as a beneficiary has to have been signed by the surviving spouse.   The surviving spouse had refused to sign as of the date of death.
.
RCW 26.16.030 provides in part:
   (1) Neither person shall devise or bequeath by will more than one-half of the community property.

 (2) Neither person shall give community property without the express or implied consent of the other.


My view of community property is that each spouse owns half, unless an agreement or court says otherwise, so in a person's will they can leave their 1/2 of community property to whomever they choose.

 However, an IRA is a nonprobate asset, not normally controlled by a will (unless it is a superwill, which this is not).

My conclusion is that the surviving spouse gets 100% of the community property portion of the account because the will has no effect upon the nonprobate asset.    And, the beneficiary designation for the IRA account to his daughter cannot control the community property portion of the IRA account.

Therefore, the answer on who gets the money is just an accounting exercise to establish (1) what % of the invested funds were separate funds and (2) how much the current balance is the earnings and accumulations on the separate portion and how much on the community portion??

Thus, the lions share of the account goes to the surviving spouse and the much smaller portion goes to the daughter?

Am I right so far??

Any comments would help.

Thanks,

Dale Young


Lowell Dale Young, LLC                From Real Estate to Your Estate

Lowell Dale Young                       Advice to Real Estate Buyers & Sellers

Attorney At Law               Wills, Trusts, Estate Planning

119 First Ave S. #200                        Probate and Avoiding Probate

Seattle, WA



Mailing address:

P.O. Box 25510

Seattle, WA 98165

Phone: 206-364-0200

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