Skipping the stepkids when distributing assets after death
Q: My husband has two adult children from a previous marriage. I have no children. I dislike his children and I can’t bear the thought that if I designate my husband as the beneficiary of my $1.3 million IRA, and I predecease him, then he can designate his kids as the beneficiaries. Can I use a QTIP trust for my IRA, where I provide a limited annual income from my IRA to my husband and upon his death transfer the remainder to my nephews? My husband and I have a prenuptial agreement which revokes community property, except for our home.
A: Yes, you can use a modified form of a QTIP trust (which is shorthand for “qualified terminable interest property” trust) and achieve the results you want. This kind of trust can be created either in your will, in a revocable trust or in a separate irrevocable trust agreement.
You can’t unduly limit how much income your husband receives, as the trust must provide him with all the income earned by your IRA. But even with these amounts being distributed from your IRA, it should continue to grow, leaving a considerable inheritance for your nephews.
Of course, you are going to need a trustee to administer this trust, and it should not be your husband. He would not be prohibited by law from serving as trustee, but you need someone you trust who can invest your IRA as well as possible and also make the required distributions to your husband. You would need to name someone who wouldn’t steal anything from the trust or make improper and unauthorized distributions.
If you don’t have a person who can serve as trustee, you should consider naming a trust company as trustee.
Q: I have three IRAs with my wife named as primary beneficiary, followed by my three daughters as secondary beneficiaries. We have a transfer on death deed for our house. Those are basically our
assets. We have no wills. Will these assets have to go through probate when we pass?
A: If your transfer on death deed gives the house to each other, and then to your daughters after both of you have died, then the answer is no, none of the assets you mentioned would have to go through probate.
But you didn’t mention checking or savings accounts. Most people have at least one of these. Depending on how these accounts are set up, there might be a need for some form of probate to access the funds.
The information in this column is intended to provide a general understanding of the law, not legal advice. Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice on their particular circumstances. Ronald Lipman of the Houston law firm Lipman & Associates is board-certified in estate planning and probate law by the Texas Board of Legal Specialization. Email questions to stateyourcase@lipmanpc.com.