Ira Bene Form
Hello. An individual stated that upon his death and his wife’s that all of their money will go into trust so their child cant spend it all. He said his estate planning attorney has it all set up, however, right now the beneficairy form on file states the wife is the primary bene and the child is the contingent bene. If the husband and wife both die and the child (age 27) is listed as the contingent beneficary is the child entitled to all of the money regardless of the parents intention or trust they have set up or is there some way that a trust could still dictate. I am under the impression that since the bene form on file stated the wife as primary and child as contingent that regardless of the planning the child is entitled to all of the money. Thanks
Permalink Submitted by Alan Spross on Mon, 2007-11-26 01:12
If the wife pre deceases the husband, the IRA will go to the child directly. The trust should be named as the contingent beneficiary to prevent this, and if the husband passes first, the wife should make the trust her primary beneficiary (or successor beneficiary if she does not immediately assume the IRA as her own). The trust should also be qualified so that the RMDs to the trust can be made over the child’s life expectancy.
Of course, given another 10 years, the child may mature and be able to handle the funds responsibly by inheriting directly. Another possibility is partitioning the IRA and leave a small IRA directly, and the bulk of the funds to the trust after the second spouse passes.
Permalink Submitted by Bruce Steiner on Mon, 2007-11-26 01:28
If you want to leave the IRA to the child in trust rather than outright, it’s not enough to draft the provisions for the trust in your Will (or in a separate trust instrument). You also have to name the child’s trust (rather than the child) as the beneficiary (on the beneficiary designation form).
Permalink Submitted by paul joanou on Mon, 2007-11-26 11:48
Alan. According to the way the bene form is now if i were the advisor and both parents died and the kids are listed as the contingent basically they can do with the money whatever they want regardless of what trust are set up correct? [quote=”[email protected]“]If the wife pre deceases the husband, the IRA will go to the child directly. The trust should be named as the contingent beneficiary to prevent this, and if the husband passes first, the wife should make the trust her primary beneficiary (or successor beneficiary if she does not immediately assume the IRA as her own). The trust should also be qualified so that the RMDs to the trust can be made over the child’s life expectancy.
Of course, given another 10 years, the child may mature and be able to handle the funds responsibly by inheriting directly. Another possibility is partitioning the IRA and leave a small IRA directly, and the bulk of the funds to the trust after the second spouse passes.[/quote]
Permalink Submitted by Alan Spross on Mon, 2007-11-26 19:05
Yes. as it stands right now a number of outcomes are possible depending on who passes first and what action the survivor takes:
1) Owner passes and IRA goes to surviving spouse. That eliminates the contingent designation altogether, and surviving spouse then needs to name her own beneficiary. If she follows suit and names the child, he will indeed inherit directly when she passes. Note Bruce Steiner’s post above regarding the requirement that the trust be named as beneficiary on the IRA agreement for the IRA to be payable to the trust.
2) If the wife passes first, then when the husband dies, the IRA will go to the child contingent beneficiary he named directly as it presently stands.