The United States Court of Appeals for the First Circuit recently held that the ex-spouse of a deceased man was entitled to the proceeds of his IRA account. This case is informative for people who are going through divorce and having their soon to be ex-spouse named as a beneficiary on their investment or insurance accounts. If you are considering divorce, you should consult a knowledgeable Rhode Island divorce attorney to make sure that all of your designations are as you want them.
Facts of the Case
This case revolves around an Individual Retirement Account (“IRA”), which is a type of investment account intended to help finance retirement. A man was married and opened an IRA account through his employer. At that time he named his wife as the beneficiary of the account in the event of his death. A couple of years after the account was created he got divorced. However, he never removed his now ex-wife as the beneficiary of the IRA.
A few years later he transferred most of the assets in the IRA to another account. However, some of the assets in the original account were not transferable. Instead of liquidating them so he could transfer them, he instructed his broker to keep the nontransferable assets in the original IRA. After making this change, the financial statements sent by the managers of the original IRA still had the same account number as always. However, instead of listing his now ex-wife as the primary beneficiary as before, the statements said that the beneficiary designation was “not provided.”
Approximately a year later the man died. At issue is who the assets in the original IRA should go to. His ex-wife believed they should go to her as at his death she was still technically listed as the beneficiary. The distributee of his estate argued that the IRA assets should go to her. She argued that at the time of transfer essentially a new account was created and thus it should be considered part of the estate.
Divorce and Benefits
The court here found for the ex-wife and held that the original account was never terminated, nor was she removed as the beneficiary. Thus she remained the beneficiary at the time of her ex-husband’s death. This is true even though in the divorce agreement it stated that each party was solely entitled to the assets in the investment accounts in their own names.
This case underscores the importance of making sure that after a divorce you update your beneficiary declarations. Some divorce agreements may require one or both parties to keep the other as beneficiaries of accounts. They also may require that one or both parties keep current life insurance policies with the other spouse entitled to benefits. It is important to fully understand all the implications of your divorce agreement and to make sure that you update all of your accounts in accordance with your wishes.
Contact an Experienced Rhode Island Divorce Attorney Today
Divorce can affect many aspects of your life and finances. The knowledgeable Rhode Island divorce attorneys at Bilodeau Capalbo, LLC, can help you to make sure that all of your accounts are consistent with your divorce agreement and desires. Call (401) 300-4055 or use the form on this web site to contact us today for a free consultation!
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