Podcast Summary:

ACTEC Trust & Estate Talk

Episode: Estate Planning Considerations in Community Property States Relating to Retirement Accounts
Host: ACTEC Fellow Natalie Perry
Guest: ACTEC Fellow Karen Gerstner (Houston, Texas)
Release Date: February 17, 2026

Episode Overview

This episode tackles the nuanced interplay between community property laws and retirement account planning. ACTEC Fellow Karen Gerstner delves deeply into how IRAs, 401(k)s, and other retirement accounts are affected by the peculiarities of community property in nine specific U.S. states. The episode clarifies the common misunderstandings surrounding account titling, beneficiary designations, and practical pitfalls for estate planners and clients alike.

Key Discussion Points & Insights

Understanding Community Property vs. Common Law States

• Definition and Scope
  • Community property states: Louisiana, Texas, New Mexico, Arizona, Nevada, California, Washington, Idaho, Wisconsin (01:27).
  • Fundamental distinction: In community property states, “both spouses own equal, undivided vested community property interests in assets acquired during marriage” (03:02).
• When Spousal Rights Arise
  • In community property states, ownership attaches during marriage; in common law states, it’s at divorce or death (03:33).
• Title Isn’t Ownership
  • Asset title in one spouse’s name does not reflect true ownership: “The title of a particular account or other asset does not indicate the owner of the asset...the spouse who is the titled owner…is just the manager of that asset on behalf of both spouses.” (04:18).

Distinguishing Separate and Community Property Retirement Accounts

• How Property Becomes Commingled
  • Retirement accounts brought into marriage or inherited typically start as separate property.
  • In some states (Texas, Louisiana, Idaho, Wisconsin), “income from separate property during the marriage is community property,” leading to mixing of property types within one account (07:05).
• Avoiding Unintentional Commingling
  • Solution: Marital property agreements can clarify that “income earned inside their inherited IRA will be separate property” (08:16).

Importance of Beneficiary Designations for Retirement Accounts

• Beneficiary Designation Assets
  • Retirement plans are “beneficiary designation assets… transferred at death by the applicable beneficiary designation form,” not by will or title (09:26).
• Community Property Interests on Beneficiary Forms
  • “The participant needs to consider that this plan…is a community property asset owned equally by both spouses.”
    • Minimum: Name spouse as at least 50% primary beneficiary (10:11).
    • Risk: Naming anyone else as more than 50% beneficiary can result in “disposing of not just his interest… but also the spouse’s” (11:48).

Notable Moment:

• Financial advisor once recommended naming grandchildren as primary beneficiaries for IRA. Gerstner’s response:
  • “The participant was also disposing of his spouse’s community property 1/2 interest… If the spouse didn’t challenge that, she would be making a gift of her half… which is not a good result.” (12:01)

Legal Remedies and Litigation Risks

• Fraud on the Community
  • If a spouse designates more than 50% to a non-spouse beneficiary, the surviving spouse could allege “fraud on the community”—though courts may weigh other assets and overall fairness (13:10).
• Practical Challenges
  • Surviving spouses could be forced to dispute designations post-mortem to protect their interest, “because if she doesn’t dispute it, then she really is making a gift” (13:51).

Qualified Plans vs. IRAs: Post-Death Rights and Dispositions

• Federal Preemption: Qualified Plans
  • Citing Boggs v. Boggs, Gerstner explains, “non participant spouse, if she dies first, has no right to dispose of any interest in the Participant’s qualified plan… Simply federal preemption, ERISA over state community property law” (14:41).
• IRAs (Including Rollovers) – No Preemption
  • For IRAs, community property rights remain: “IRAs, including IRA rollovers, are not subject to the Boggs rule.”
    • If non-participant spouse dies first, her half is a probate asset and can be disposed of in her will/intestacy (15:17).

Key Quote:

• “In Texas at least, lawyers who are writing a will for the non participant spouse are going to include a provision… leaving her community property 1/2 interest in the IRA titled in the participant’s name” (16:03).

• Co-ownership Risks

  • If the non-participant spouse bequeaths her share to someone other than the participant spouse, this can result in co-ownership of the IRA, which complicates management and tax reporting (16:49).

Modern Estate Planning Best Practices

• Marital Property Agreements and Segregation
  • Couples may partition accounts to keep each spouse’s IRA as separate property, often with offsetting assets to equalize estate plans (18:14).
• Criticality of Precise Planning
  • “It’s not that simple when an IRA is community property…” Mistakes or neglect can trigger unintended gifts, tax acceleration, or complicated co-ownership scenarios (18:36).

Federal Law Interface: The Retirement Equity Act

• Spousal Consent for Qualified Plans
  • “Participant must name his spouse as beneficiary. The spouse and the participant can waive and consent…” Compliance eliminates most community property law conflicts (18:48).

Notable Quotes & Memorable Moments

• "The spouse who is the titled owner of a community property asset owes fiduciary duties to the other spouse..."
  (04:30, Karen Gerstner)
• “You just can’t have the participant naming someone other than the spouse as a beneficiary of more than 50% of that retirement plan, because that means the participant is disposing of not just his interest…but also the spouse’s.”
  (11:48, Karen Gerstner)
• “If she doesn’t dispute it, then she really is making a gift.”
  (13:51, Karen Gerstner)
• "As far as [IRA custodians] are concerned, the IRA is still owned 100% by the participant after the death of the non participant spouse."
  (17:45, Karen Gerstner)

Timestamps for Key Segments

• [01:27] Community property overview and fundamental differences versus common law
• [04:18] Asset titling myths in community property states
• [07:05] Commingling of separate and community property in retirement accounts
• [09:26] Beneficiary designation assets explained
• [11:48] Risks of improper beneficiary designations
• [13:10] Fraud on the community and remedies
• [14:41] Qualified plans, ERISA preemption, and Boggs v. Boggs
• [15:17] IRAs and probate rights of non-participant spouse
• [16:49] Real-world complications of co-ownership in IRAs
• [18:14] Practical planning with marital agreements
• [18:48] Retirement Equity Act and spousal consent

Summary Takeaways

• Estate plans involving retirement accounts in community property states require a clear understanding of ownership, titling, and spousal rights.
• Beneficiary designation forms must reflect community ownership—otherwise, post-death disputes, tax headaches, or unintended gifts may occur.
• IRAs and qualified plans differ notably in how spousal rights are treated after death due to federal law overlays like ERISA.
• Custom marital property agreements and careful will drafting can help avoid pitfalls, commingling issues, and family disputes.
• Planners must educate clients in community property states—misunderstandings are common and potentially costly.

This summary distills the insights and warnings relayed on the episode and should serve as a guide to professionals and clients navigating retirement account estate planning in community property states.