Hi...I have two good sons who are in their 30's from a first
marriage. My second wife and I have been married many years, she's a
wonderful woman. I am in the process of purchasing a variable annuity
which will reside in an IRA account. If I die first, I would like my
current wife to continue to receive distributions from the annuity.
Upon her death, I would like any residual value in the annuity to flow
to my two sons. While I trust my current wife implicitly, one can
imagine scenarios where she is incapacitated and others could act on
her behalf, making decisions that are not aligned with my wishes. How
can I insure that my wishes will be carried out?
I am preparing to meet with my attorney to discuss this question. In
a preliminary discussion, he has suggested that he draw up an
"Agreement" that would be enforceable by my sons after my death that
would obligate my current wife to name my sons as beneficiaries. In
preparation for this meeting I would like your opinions on this or
alternate strategies that would accomplish my goal...TIA, Ron
In Louisiana, a community property state under Napoleonic law, we use
a usufruct "trust" where the asset is left to the children but the
wife has all the rights to use it until her death.
I don't know if other states allow this.
You would also want to include a provision for what would happen if
either or both sons should happen to die before she does. And what if
the brothers have a major disagreement about the annuity later on?
I would be inclined to get *two* annuities, both naming the wife as
the primary beneficiary. Have each one name a different brother as the
In recent years there has been a lot of criticism of variable annuities
on this newsgroup and elsewhere. It has been pointed out repeatedy that
the fees and expenses associated with these annuities are excessive and
that they are not always the best choice for consumers. I am just
wondering if there is not some better way to accomplish your goal via
some other method with a different financial product.
Heritage trusts (generation skipping trusts), which handle such
situations, are already in place for each of my sons. The "Agreement"
would specify that the remaining value of the annuity flow 50:50 into
these two trusts
On Sun, 6 Dec 2009 02:02:20 -0600, bo peep
For purposes of this discussion, I assume that the owner/annuitant is
making withdrawals from the annuity's principal, as opposed to
annuitizing the annuity's principal (receiving a lifetime income.)
Once I start making withdrawals, my wife and I will receive
distributions for the rest of our lives. A minimum lifetime(s)
distribution is guaranteed. Depending upon market performance a
remaining account balance may exist after the second death.
Talk to the annuity company - many have restricted beneficiary options that
can be included in the contract. This would be the easiest way to handle
this. If this isn't an option for you then you may need to restructure who
the beneficiaries are, naming a QTIP or bypass trust as the recipient of the
income stream with the residual monies going to remaindermen.
Gene E. Utterback, EA, RFC, ABA