ROTH and Non ROTH’s in Same Irrevocable Trust
For an Irrevocable Trust holding ROTH IRA assets, is there any reason why the same Trust “should not” hold Non-tax deferred assets with different distribution requirements than the ROTH?
If those earnings of the Non ROTH assets are to be distributed to the Trust beneficiary rather than held in the Trust, do they need to be distributed as they are received by the Trust ( some mutual funds may have an early year distribution in addition to a year end distribution) or will they only need to be distributed to the beneficiary before the end of the taxable calendar year to avoid being taxable to the Trust?
How are increases in the value of an ETF investment in the Irrevocable Trust handled in this case where there may be considerable increase in the value of that investment though minimal earnings distributed?
Permalink Submitted by Alan - IRA critic on Sun, 2025-04-06 15:13
No reason that the same trust cannot inherit IRA or qualified plan balances as well as non tax deferred assets.
The trust can elect to pass through trust income to beneficiaries up to 65 days from the end of the tax year and the beneficiaries will then report the income on their personal tax rates for the year the trust received that income. Beneficiaries will receive a K 1 from the estate. Therefore, there is no need to pass through the income right after the trust receives it. Cap gains are not passed through until realized by the trust.