Trusts and Estates
Reich v. Reich
Cite as B332714
Filed October 24, 2024
Second District, Div. Two
By Michelle Barnett Batista
Aaron, Riechert, Carpol & Riffle, APC
www.arcr.com
Headnote: Omitted Spouse’s Share – Nonprobate Assets
Summary: For purposes of calculating omitted spouse’s share, “decedent’s estate” does not include individual retirement account (IRA) proceeds distributed to separate trusts created by the decedent’s testamentary trust.
Thomas created a revocable living trust (“Trust”) prior to his marriage to Pamela. In the Trust, Thomas established separate trusts for the benefit of his daughter and granddaughter. Thomas later designated the separate trusts as beneficiaries of Thomas’s IRA proceeds. Following Thomas’s death, Pamela filed a petition seeking an omitted spouse’s share of Thomas’s estate. Pamela argued that the IRA proceeds were included in Thomas’s estate because they had to be marshalled through the Trust before they could pass to the separate trusts. The trial court determined that the IRA proceeds were not part of Thomas’s estate because the IRA proceeds were a nonprobate asset and would flow directly to the separate trusts. Pamela appealed.
The appellate court affirmed. Although IRA proceeds can sometimes pass through a trust that becomes irrevocable upon death, such as when the designated beneficiary of the IRA is the decedent’s trust, the IRA proceeds in this case never pass through the Trust itself. Because only the decedent’s testamentary instruments are subject to the omitted spouse’s share and because only the Trust is Thomas’s testamentary instrument, whether or not the separate trusts became irrevocable upon Thomas’s death is irrelevant. Finally, there is no evidence that Thomas intended for the IRA proceeds to pass through the Trust.