What are your options if your spouse named someone other than you as a beneficiary on a community property life insurance policy or retirement account?

California Probate Code Section 5021 states that: 

 (a) In a proceeding to set aside a nonprobate transfer of community property on death made pursuant to a provision for transfer of the property executed by a married person without the written consent of the person’s spouse, the court shall set aside the transfer as to the nonconsenting spouse’s interest in the property, subject to terms and conditions or other remedies that appear equitable under the circumstances of the case, taking into account the rights of all interested persons.

(b) Nothing in subdivision (a) affects any additional remedy the nonconsenting spouse may have against the person’s estate for a nonprobate transfer of community property on death without the spouse’s written consent.

Therefore, a court is permitted to set aside a nonprobate transfer of community property (for example, the naming of someone other than a spouse as a beneficiary of a community property retirement account) if the other spouse does not consent.

Many financial institutions forms and life insurance forms have a place where spousal consent must be indicated by his or her signature. That being said, if there is no place for a spouse to sign, you should contact the financial institution to see about how to fulfill this requirement.

There are a whole class of assets that pass without the need for probate, if you've properly named beneficiaries on those accounts. These include life insurance policies, pay-on-death accounts, and retirement plans (e.g., IRAs, 401ks, etc.).

If you acquired any of these assets during marriage, and absent an agreement between you and your spouse to the contrary, each spouse should have a 1/2 interest in each since they would be considered community property. Therefore, even if you've been funding your 401k plan at work with your salary, because that salary is considered community property, your spouse has a 1/2 interest in the account.

Because the law recognizes the community property nature of these assets, if you want to name a beneficiary for your 401k (other than your spouse), your spouse must consent and typically must also sign the beneficiary designation form waiving his or her right.

Check out California Probate Code Section 5020, which states:

"A provision for a nonprobate transfer of community property on death executed by a married person without the written consent of the person’s spouse (1) is not effective as to the nonconsenting spouse’s interest in the property and (2) does not affect the nonconsenting spouse’s disposition on death of the nonconsenting spouse’s interest in the community property by will, intestate succession, or nonprobate transfer."

If you're like many clients, you have probably never checked on the beneficiary designations on assets such as life insurance policies or retirement accounts since you acquired them. You might have acquired some of those accounts before you got married and named your parents or a sibling as the beneficiary.

Part of the estate planning process should entail you reviewing assets which are transferred by beneficiary designation to make sure they are up to date.

It's not unusual for parents to make gifts to their children. Sometimes these gifts are made to custodial accounts under the California Uniform Transfers to Minors Act. Many times these gifts are made by one spouse or the other without much thought to the premise that the gifting spouse assumes the other spouse would consent (or the dollar amount isn't really worth fighting over).

While it is true that gifts made by both spouses mutually don't require consent, some might consider taking an extra precautionary step of documenting that consent when making a gift to to a minor child (or other third party for that matter) in order to prevent one spouse from claiming lack of consent to the gift.

How do you ensure you got consent?

Simple, just obtain a document which contains the other spouse's written agreement to make the gift to the third party. Having this in writing can not only make sure that you and your spouse are on the same page, but it will also ensure that the gift remains valid and not subject to later attack.

With statistics showing that disagreements about money is a leading cause of divorce, it may even even help to foster a healthier marital relationship.

There are some exceptions to the general rule that your spouse must provide consent when you make gifts of community property. 

Situations Where Spousal Consent Isn't Required

1. Both spouses are mutually making a gift of community personal property to a third party.
2. The third party pays for the community personal property at a fair and reasonable value.
3. The gift of community personal property is to the other spouse.

Void vs. Voidable Gift

What about community property gifts that your spouse made in the past without your consent?

In general, a gift that your spouse makes without your consent is considered a "voidable" (not "void") gift. That means you could technically bring a legal action to set aside or have the gift declared void, but that the gift itself is not void without any further action. If you're spouse is still alive, you could void the gift in its entirety, whereas, once your spouse passes away, you may only void the gift up to your one-half community property interest.

Sometimes, people run afoul of this rule without thinking much about it because the item of community property being given away is of nominal value or because it's not worth the effort to enforce one's community property interest in a certain item.

However, the underlying principal generally applies to all gifts of community property, so it's important to keep these rules in mind when one spouse tries to gift assets that are valuable.