Planning When Married

IF YOU’RE MARRIED, you enjoy certain tax privileges, such as the unlimited marital deduction, which we’ll tackle later in this chapter. But there is also a key obligation: You have to bequeath a minimum amount to your spouse. Exactly how much varies from state to state.

There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Puerto Rico is also a community property jurisdiction. In Alaska, spouses may create community property by entering into a community property agreement, but such agreements are optional. In a community property state, the wealth acquired during the course of the marriage—except gifts and inheritances—is considered equally owned by you and your spouse. That means you need to leave at least that much to your spouse.

The remaining states are common law states. In these other states, your spouse isn’t entitled to an automatic 50% of the marital property. Instead, the minimum—typically a third of the deceased spouse’s property—is specified by state law.

You are also required, under federal law, to name your spouse as beneficiary of your 401(k) plan and other “qualified” employer-sponsored plans, unless your spouse signs a waiver. This isn’t true of an IRA. That said, if you live in a community property state, your spouse may be entitled to a portion of your IRA if you made contributions to the account while you were married.

Next: Naming Beneficiaries

Previous: Disclaiming

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