Jan L. Warner & Jan Collins

	JWR's Pundits World Editorial Cartoon Showcase Mallard Fillmore Michael Barone Mona Charen Linda Chavez Ann Coulter Greg Crosby Larry Elder Don Feder Suzanne Fields James Glassman Paul Greenberg Bob Greene Betsy Hart Nat Hentoff David Horowitz Marianne Jennings Michael Kelly Mort Kondracke Ch. Krauthammer Lawrence Kudlow Dr. Laura John Leo Michelle Malkin Jackie Mason Chris Matthews Michael Medved MUGGER Kathleen Parker Wes Pruden Sam Schulman Amity Shlaes Roger Simon Tony Snow Thomas Sowell Cal Thomas Jonathan S. Tobin Ben Wattenberg George Will Bruce Williams Walter Williams Mort Zuckerman Consumer Reports

Control your assets from the grave

http://www.NewsAndOpinion.com | Q: I'm 74, remarried and have three grown children from my first marriage. My 63-year-old wife has four children from her first marriage. We don't have a premarital agreement, but keep our assets separate and intend to leave our respective estates to our own children. I want to give my wife the right to receive income until she dies, but not control over my assets.

My will is set up to do this, but she's listed as beneficiary of my largest asset -- a $375,000 IRA. My lawyer and the bank holding my IRA tell me that I will have to trust my wife to fulfill my wishes, making sure my children get the money. While I do trust her, I don't know what the future will hold. Is there a way to protect my IRA for my children and give my wife just the income?

A: Many folks who remarry and have children by previous marriages find themselves in a pickle when it comes to passing on traditional IRAs. It's reasonable to want to provide for your spouse and also ensure that what's left after she dies goes to your children.

Naming your children as contingent beneficiaries won't work. Should you die before your wife, she could roll over your IRA into her own IRA, naming her children or even a new husband as beneficiaries. If she gets in a financial crunch, she could withdraw all the funds from your IRA, leaving your kids with nothing.

However, there are a number of options when it comes to naming beneficiaries of your IRA. For example, in addition to naming your spouse, you have the flexibility of naming your children, a trust or even a qualifying charity. Or you can break up your IRA into four separate IRAs -- one for your spouse and one for each of your children.

While making your spouse the beneficiary may be the most flexible alternative, a trust is the better solution. It simultaneously provides your wife with funds and ensures that your children receive an inheritance. By using the trust, your spouse would lose the ability to roll your IRA account into hers and, therefore, also lose the right to choose new beneficiaries and method of distribution.

You can plan it so that the trust makes only partial distributions, with other portions to be based upon your spouse's income and financial situation. But since trusts are hit with the highest income tax rates very quickly, your trustee should be in a position to make distributions to avoid income taxes.

Through an appropriately prepared trust, you can literally control your assets from your grave. You determine in advance who gets what, all the while preventing the beneficiaries from withdrawing all or large chunks of your IRA. Should you want to use a trust as beneficiary, we suggest that a qualified lawyer prepare it for you, and that a corporate fiduciary be appointed to manage the IRA to protect the asset from creditors and imprudent withdrawals.

If you choose to move in this direction, remember that the trust prepared for you must be valid under the law of your state of residence, and that the beneficiaries you choose must all be identifiable people. Make sure to give the trustee a summary of the trust. At the time of your death, the trust becomes irrevocable, so make sure it says exactly what you want it to say.

Find this column helpful? Why not sign-up for the daily JWR update. It's free. Just click here.

JAN L. WARNER received his A.B. and J.D. degrees from the University of South Carolina and earned a Master of Legal Letters (L.L.M.) in Taxation from the Emory University School of Law in Atlanta, Georgia. He is a frequent lecturer at legal education and public information programs throughout the United States. His articles have been published in national and state legal publications. Jan Collins began co-authoring Flying SoloŽ in 1989. She has more than 27 years of experience as a journalist, writer, and editor. To comment or ask a question, please click here.