[WSBAPT] 401K to IRA - CP Question

[Eric Nelsen]

If the 401(k) was entirely accumulated prior to the marriage and has been segregated all along to keep it as Husband's separate property, then I think rolling it over into an IRA does not change its characterization. If it is rolled over into an IRA that already existed and included community funds, then the separate property contribution will only remain separate property so long as it is reasonably traceable. If it becomes commingled with the community funds already present in the IRA, then likely it would be converted to community property.

If the 401(k) was accumulated during the marriage it is community property, even though it's in Husband's name only. All earnings and benefits from employment earned during the marriage by either spouse, including deferred compensation, is community property. So, I think the IRA is CP as well, in that case.

If the 401(k) was accumulated partly prior to marriage and partly during the marriage, then it is typically considered separate property and community property in proportion to the length of employment, split between the pre-marriage period and the post-marriage portion. If it is then rolled over into an IRA, you have a more complicated traceability problem, which makes it more likely that the entire thing would be considered community property.

With married couples and fungible assets like investments and cash, traceability is usually the important evidentiary issue if you want to avoid having it declared as community property. If separate property gets commingled with community property, the presumption is that it is all community, and the burden of proof is to trace a separate contribution. And even then, traceability is not automatically going to preserve the separate property status.

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 Jacob Menashe
Sent: Thursday, October 15, 2015 9:49 AM
To: WSBA Probate & Trust Listserv
Subject: [WSBAPT] 401K to IRA - CP Question

A community property question:  Assume Husband and Wife in a long-time marriage have always lived and worked in Washington. Husband rolls over his 401K, which would not be considered community property, into an IRA which, in some cases, can be. Do we have a CP IRA now? (I know they could make CP if they want, but I’m wondering what’s the answer if there’s just the rollover.) I apologize if I’m missing something here I should know.

Thank you,

Jacob

_______________________________
Jacob H. Menashe
Hickman Menashe, PS
4211 Alderwood Mall Blvd., Suite 202
Lynnwood, WA 98036
(425) 744-5658 phone
(425) 744-6078 fax
Satellite Office in Bellevue
www.hickmanmenashe.com




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