Individual or Trust beneficiary of Roth IRA

Submitted by dorothy robbins on Sat, 2021-01-23 19:58

For non-EDB beneficiaries subject to SECURE, what are the advantages and disadvantages of naming individual(s) vs a Trust as beneficiary? If a Trust is advisable, what are the advantages of an Accumulation Trust, other than creditor protection, for responsible adult beneficiaries?



Submitted by Alan - IRA critic on Sat, 2021-01-23 23:27

For a non spouse inherited Roth IRA left to a trust which is not qualified for look through, the 5 year rule will apply, whereas the 10 year rule will apply if the trust is qualified. If left outright, the 10 year rule would also apply. Creditor protection is the main benefit for a responsible trust beneficiary as there is no need for spendthrift controls.  Some states provide full creditor protection for inherited IRAs by statute as well. Therefore, there is no need for a trust in such situations. 

Submitted by Bruce Steiner on Mon, 2021-02-15 01:19

The benefits are that it keeps the benefits out of the beneficiaries’ estates and it protects the benefits from the beneficiaries’ creditors and spouses.  Our clients generally provide for their beneficiaries in trust rather than outright for these reasons.
Bruce Steiner

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