A customer who lives in California was the sole beneficiary of a traditional IRA and established a beneficiary IRA with our bank. Does she need her estranged spouse’s consent to designate a non-spouse beneficiary on that account?

No, we do not believe that your customer needs to obtain the consent of her spouse in this situation. However, because this case involves California law, you also may wish to consult with your bank counsel.

Community property states automatically grant an interest in property owned by one spouse to the other spouse in most situations. However, while California is a community property state, and your customer is domiciled in California, the California state constitution excludes inherited property from its community property rules. In our view, the IRA’s assets transferred to your customer as the decedent’s named beneficiary should be treated as an inheritance (this is commonly referred to as an “inherited IRA”), in which case it would not be considered to be community property in California.

For resources related to our guidance, please see:

IRS Publication 555 (“The law of the state where you are domiciled will determine if you have community property, community income, or both.”)

California Family Code §760 (“Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.”)

California Family Code §770 (“Separate property of a married person includes all of the following: . . . All property acquired by the person after marriage by gift, bequest, devise, or descent.”)

California Constitution, Article I, § 21 (“Property owned before marriage or acquired during marriage by gift, will, or inheritance is separate property.”)

California Supreme Court, In re Marriage of Valli, 324 P.3d 274, 276 (Cal. 2014) (“Property that a spouse acquired during the marriage is community property unless it is (1) traceable to a separate property source, (2) acquired by gift or bequest, or (3) earned or accumulated while the spouses are living separate and apart.”) (internal citations omitted)

IRS Publication 555 (“Generally, separate property is: . . . Property that you or your spouse (or your registered domestic partner) received separately as a gift or inheritance during your marriage (or registered domestic partnership).”