A family trust can be a powerful planning tool, but using one as powerfully as possible takes thought and care.

Consider this week's letter, from a reader named Lavon. She wrote that she and her husband have a family trust, which is listed as a second beneficiary for all of their insurance policies and investments.

"He is listed as a first beneficiary if I die first, and I am listed as a first beneficiary if he dies first," Lavon wrote. "My husband and I are listed as joint tenants in the ownership of our home. We have five daughters listed in the trust, with one of them as trustee.

"However, I am now concerned because my husband has Alzheimer's. He is unable to do any financial concerns. When the trust was drawn up, he had a power of attorney to take over if I am incompetent, and I had a power of attorney to take over if he is incompetent.

"My daughters are concerned that if I die first he will be unable to handle the finances if everything is handed over to him. Would giving a power of attorney to one of our daughters in the event I die first be the answer? Would that also take care of the home ownership?"

For answers to Lavon's questions, I contacted Randy Holmgren, an estates and trusts attorney with the Salt Lake City law firm Jones Waldo Holbrook & McDonough.

Randy says his first thought is that Lavon's house should be titled to the family trust. If the trust owned the house, Randy says, Lavon and her husband could live there for the rest of their lives, after which it would be given to their children based on the terms of the trust.

"If you're going to have a trust, then use the trust," he says. "It's like having a car parked in the garage, but we don't ever drive it, because we like the bicycle better. If you're going to have a trust, the purpose of the trust is to deal with the questions she's asking."

The same holds for life insurance policies, Randy says.

"I don't know why she would have her husband as the primary beneficiary on a life insurance policy, or vice versa," he says. "Once again, you would think you would want the money to go to the trust, because then whoever is in charge of the trust can take care of the money ... put it in investments, make withdrawals for the benefit of the surviving spouse."

As for Lavon's question about power of attorney, Randy says the trust probably already indicates that, if Lavon dies and her husband is mentally incapacitated, a successor trustee will handle the trust.

That is not the same as power of attorney, he says. But if one of Lavon's daughters is named as the successor trustee, she would have the power she needs to take care of her mom and dad if they are incapacitated, and then the power to divide things up when her parents are gone.

He says Lavon should consult with her lawyer, both on the question of shifting ownership of her home to the trust and on the designation of a successor trustee. She also may want to review the trust to make sure it will accomplish all she wants it to do.

"Most likely it was already designed to do everything she's now worried about," Randy says.

I hope that helps, Lavon. Let me know how everything works out.

On a different — but related — issue, a reader had a follow-up question to a column I wrote a few weeks ago.

Tom wrote: "In your column of Nov. 11, you seemed to imply that naming children as secondary beneficiaries of an IRA would automatically ensure that they would inherit the IRA when the primary beneficiary (the spouse) died. Is that really true? Couldn't the primary beneficiary use the IRA funds as he/she saw fit?"

I ran this by Alan B. Tingey, principal at Cannon Tingey Investment Advisors in Salt Lake City, who helped with the initial column.

He wrote in an e-mail response that naming children as secondary beneficiaries does not suggest that they will automatically inherit the IRA.

"The surviving spouse, as primary beneficiary, becomes the new owner of the IRA upon the death of her spouse," Alan wrote. "It then becomes her IRA. She can deplete all or part of the IRA by taking distributions in one lump sum or in minimum amounts during her lifetime. ...

"Whatever is left in the IRA at the second spouse's death can be passed on to the children as inherited IRAs; however, they will be immediately obligated to take minimum distributions based on their own life expectancies, regardless of their ages."

I hope that clarifies the issue, Tom.

If you have a financial question, send it to gkratz@desnews.com or to the Deseret Morning News, P.O. Box 1257, Salt Lake City, UT 84110.

E-mail: gkratz@desnews.com