ROTH IRA to Living Trust
Why/why not would the Grantor of a Living Trust want that Trust as beneficiary of their ROTH IRA and would the 10 year tax free growth of that ROTH continue within the Living Trust? If so, after 10 years would tax rates apply as in other Trusts for beneficiaries?
Permalink Submitted by Alan - IRA critic on Fri, 2022-09-16 15:34
The Roth would continue to generate gains over the 10 year rule period and no annual RMDs are required. All distributions from the Roth IRA into the trust would be tax free as long as 5 years has passed since the grantor’s first Roth IRA contribution. As such the longer the Roth IRA can be left alone after it is inherited, the more tax free gains would be generated and a lump sum distribution to the trust at the end of the 10 years would not be taxable. However, it is critical that the trust be qualified for look through treatment or the 5 year rule will apply.
Permalink Submitted by Bruce Steiner on Sat, 2022-09-17 16:37
A revocable trust is merely an administrative trust. The IRA owner might leave the IRA to the beneficiaries of the revocable trust. But there would generally be no benefit to running it through the revocable trust.