A family member is left out of a will. Can his siblings share their windfall?

Dear Liz: My father passed away in May of last year. In his trust, he intentionally left out one of my four children. The remaining three, who were to inherit a substantial sum, decided to pool their money and share it with their excluded sibling.

My stepmother, who is in charge of his trust, has told other recipients of his largess that she will not be distributing any money to my children. She claims that their decision to give money to their sibling is a violation of my father’s wishes. Can she do this legally and would there be any consequences to her for doing this?

Answer: That depends on the trust’s language. Your father may have granted your stepmother the power to make discretionary distributions, or may have explicitly stated that distributions could be withheld from your children if they planned to share with the disinherited grandchild.

That’s not the norm, however. If the trust requires her to distribute the money and she fails to do so, your children could sue her for breaching her fiduciary duties and ask a court to replace her as trustee, says Jennifer Sawday, an estate planning attorney in Long Beach. If your stepmother’s attorney hasn’t explained this to her already, your kids may need to hire one who will.

The unanswered question: Why did your kids make their plan known, rather than simply waiting close-mouthed until the money was distributed? Perhaps they wanted to make a show of solidarity with their sibling, but the smarter course would have been to keep their intentions under wraps until the money landed in their accounts and was theirs to spend however they saw fit.

Be careful when commingling old and new funds in a Roth IRA

Dear Liz: I am a stay-at-home mom of 15 years who has a Roth IRA account from working before marriage. I will start working again soon and would like to know how to best protect my separate property from my future community property earnings. Should I start a new Roth IRA instead of adding to my existing one so as to not commingle the funds?

Answer: That could be a smart idea.

In general, assets acquired before marriage are considered separate property. But that status can change if post-marriage funds are added into pre-marriage accounts. The rules vary by state, but making retirement contributions to a new account can help keep the lines between separate and marital property from getting blurred.

When it comes to Roth IRAs, 59½ and 5 are the magic numbers

Dear Liz: You recently answered a question about Roth conversions, saying that each conversion triggered its own five-year holding period. It was my understanding that after age 59½, the five-year rule doesn’t apply and earnings aren’t taxed.

Answer: The rules for Roth IRAs can be complicated, and they’re different for accounts that you fund directly versus those that are funded through conversions.

If you contribute directly to a Roth, you can withdraw your contributions any time without tax or penalty. You can withdraw earnings tax free if you’re 59½ or older and the account has been open for at least five years.

But as mentioned in the previous column, the five-year holding period applies to each conversion you make from another retirement account into a Roth. What goes away after age 59½ is the 10% penalty for early withdrawal, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. Earnings withdrawn before five years can be taxed as income. However, it’s assumed that any withdrawals are principal first, so you’d have to withdraw the entire conversion amount before earnings would be taxed.

Luscombe notes that some people set up separate accounts for each conversion to make tracking the five-year periods easier. That could be especially helpful if they plan to make substantial withdrawals that could include earnings before the last conversion amount hits its five-year mark. Once all the five-year periods have expired, the accounts can be combined into one.

Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.