Gilfix & La Poll Associates LLP Gilfix & La Poll Associates LLP

How an IRA Trust can help avert disaster

A father designated his son and daughter as the beneficiaries of his large retirement account. The daughter’s husband was physically abusive and the couple had been considering divorce. The father was adamant that his son-in-law receive nothing from his estate.

After a very healthy life, the daughter was diagnosed with stage four cancer. The father was so distressed about his daughter’s illness that his health failed and he passed away two months later. The daughter, weakened by her illness and her grief following her father’s death, passed away four days later.

The son received 50% of the retirement account. The daughter was supposed to receive the other 50%, but she did not have an opportunity to claim the account before she passed away. She also did not have a chance to name a beneficiary of the retirement account if she should pass away. The retirement account terms and conditions provide if an account owner does not name a beneficiary to receive the retirement account, the spouse becomes the default beneficiary. The daughter’s abusive husband became the beneficiary of his wife’s interest in the retirement account. In an unthinkable but fairly common twist of fate, the abusive son-in-law received 50% of the father’s retirement account!!

An IRA Trust could have completely avoided this situation. The father could have created an IRA Trust and named the Trust as the beneficiary of his retirement accounts. The father would have chosen all future beneficiaries in the Trust, certainly excluding his son-in-law. When the daughter passed away, the funds would not have gone to her abusive husband, but rather to provide college education for our client’s grandchildren.

If you have a retirement account, you need to contact our office to discuss whether an IRA Trust is right for you. The bank has rules defining default beneficiaries if an account beneficiary is not properly named. Don’t let the bank’s plan become your plan.

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