Inherited ROTH IRA
Situation:
A client recently passed away with a ROTH IRA that she had held for over 5 years.
She has two children that were named as beneficiaries. Prior to her death, she established a living trust naming the individual trusts (one for each child) as benenficiary. One child has opted to cash out the other would like to keep the money invested and make the required minimum distributions from the account. I am not sure how this works with the trust being involved and the trust attorney will not advise unless the childen they hire him to advise.
Please help!
Permalink Submitted by Anthony Lehrer on Wed, 2013-02-13 17:47
Sorry for the typos in the previous post> typed topo fast.
Permalink Submitted by Alan - IRA critic on Wed, 2013-02-13 18:05
What does the beneficiary clause on the Roth IRA state? Does it just name the living trust or does it specifically name each separate trust?
Permalink Submitted by Anthony Lehrer on Wed, 2013-02-13 19:20
The ROTH specifically names each separate trust.
Permalink Submitted by Bruce Steiner on Wed, 2013-02-13 20:00
Wouldn’t it be up to the trustees of each child’s trust?
Permalink Submitted by Alan - IRA critic on Wed, 2013-02-13 20:01
First, all Roth distributions will be tax free as the Roth is qualified. But the trusts must also meet the IRS requirements listed in Pub 590 to enable the trust RMDs to be based on the life expectancy of the oldest trust beneficiaries. Note that all Roth distributions will have to be made to these trusts, but the trustee of the trust who wants to stretch the RMDs from the Roth should establish an inherited Roth for the particular trust no later than the end of the year following the year of death. RMDs can then be taken over the child’s life expectancy. Copies of the trust and related information must be submitted to the Roth custodian no later than 9/30 of the year following owner’s death for the trust to be considered qualified.