600 / What are the gift tax consequences to the spouse of an individual who designates a third party beneficiary to receive a survivor benefit payable under a qualified plan, a tax sheltered annuity, or an individual retirement plan if community property law applies?

It should be noted that community property law varies from state to state with respect to the power of a spouse to make a gift of community property without the express consent of the other spouse.

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Planning Point: If a participant designates the spouse as the beneficiary of a benefit payable under a qualified plan, the participant also should provide for a contingent disposition in case the spousal beneficiary disclaims the benefit or dies first, and in such case, could provide that on death, the spousal beneficiary’s interest would pass to that spouse’s estate, and the participant’s interest would pass to a credit shelter trust that would pay the income interest. In this manner, the participant can take advantage of the unified credit and avoid a gift as to the spouse’s interest.²

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