Until Death Do Us Part.2 – Whispers
You’ve remarried. Both you and your spouse have children from a previous marriage, everyone is getting along famously, and your conscience whispers in your ear – “don’t we need to re-do our wills?”
And then some; don’t forget the Powers of Attorney and Living Wills. Your conscience is a little active today, and again whispers – “will my children be taken care of if I succumb first?”
You remember that in your IRA you designated as you primary beneficiary your new spouse and your naturally born children as secondary beneficiaries. You mention this to your neighbor, and she points out – “well, you know, your spouse could change the beneficiaries to his naturally born children after your gone, what if he remarries?”.
Had we been the advisors on the IRA we might have suggested that the beneficiary be a trust, for the benefit of the surviving spouse, with the beneficiaries of the trust your naturally born children. WHY? This solution allows your spouse to benefit until her death at which point what’s left passes on to your children. But, wait isn’t naming a trust as beneficiary of an IRA a taxable event?
Yes, but not at once, the Required Minimum Distribution rules apply to the oldest of the named beneficiaries of the trust. And, according to the IRS, meet all of the following conditions:
- “The trust is a valid trust under state law, or would be but for the fact that there is no corpus.
- The trust is irrevocable or became, by its terms, irrevocable upon the owner’s death.
- The beneficiaries of the trust who are beneficiaries concerning the trust’s interest in the owner’s benefit are identifiable from the trust instrument.
- The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee. The trustee of the trust should contact the IRA custodian or trustee for details on the documentation required for a specific plan.”
“Well, you know, just like your IRA, your spouse could change the beneficiaries on the will to his naturally born children after your gone, even if they do not remarry.” And, just like the structure suggested on the IRA scenario, a trust with the desired provisions can help take care of the surviving spouse during their lifetime and pass on the assets to your natural born children after your spouse’s death.
Listen to the whispers….
Several case studies are available on our website https://windsorwealth.management/case-studies/
Our portfolios are fully invested
Carlos Dominguez – CERTIFIED FINANCIAL PLANNER™, Portfolio Manager, RJFS
IRS: Trust as beneficiary – https://www.irs.gov/publications/p590b#en_US_2018_publink10002910
Links are provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. The preceding information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Carlos Dominguez and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Investing always involves risk. There is no assurance that any investment strategy will be successful. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.
Raymond James does not provide legal or tax advice. When considering changes to estates, will and Powers of Attorney, legal advice should be sought – please consult with your attorney. Raymond James does not provide tax advice please consult with your tax preparer for tax related issues.
My-Risk-O-Meter® is a registered trademark of Windsor Wealth, LLC. #5,675,451