Posted on Wed, Nov. 4, 2009
Dear Harry: I married at 40 and five years later had a son, who is now 7. My wife and I have separated, and I have a virulent form of cancer. I'd like to name my son as beneficiary of my IRA. I do not want my wife to have anything to say about how the money is invested or drawn out. Is there a way to do this?
What Harry says: Actually, there are several ways. You could leave the IRA to a specified guardian for your son. You could also leave it to a trust for him with instructions to the trustee to make the required distribution to him each year. These trusts are referred to as "conduit" trusts. In most cases, the IRA custodian will help you to set this up. With the long life-expectancy of a 7-year-old (75.8 years), any money you leave can accumulate to a husky sum by the time he retires. To start out with a required minimum withdrawal of about 1.32 percent of the principal, the extra earnings of the IRA will keep adding to the principal. If the money earns a modest 6 percent, a $100,000 IRA will grow to $1.4 million at his retirement at 65. That's a pretty husky sum. (Ah, the power of compound interest!) If you fail to take the necessary steps now, there could easily be a messy legal tangle after you're gone to determine who will manage the money. In situations of separation and divorce, the IRA could wind up in the hands of someone a decedent would never have specified.
Write Harry Gross c/o the Daily News, 400 N. Broad St., Philadelphia, PA 19130. Harry urges all his readers to give blood - contact the American Red Cross at 800-GIVE LIFE.
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