Putting a Roth IRA in a Trust
Me and my wife (in our 70’s) have significant monies in our individual Roth IRA’s. We do not expect to ever need this Roth IRA for our use. We want to divide these Roth IRA’s into three parts, one for each of our three children so that they get the benefit of an extended IRA after we are gone.We also want to protect this Roth IRA money so that it transfers from us to our children to grandchildren and great grandchildren and is outside the reach of my children’s spouses or anybody else, in case they face marriage difficulties, or anybody else trying to get their hands on these Roth IRA’a (eg suing our children or grandchildren)
Presently this Roth is in our individual Roth Account at an investment firm, showing each of us as the primary beneficiary and our three children and grandchildren as the secondary beneficiaries.
The question is, which is a better option or there are other options
A. Should we create two separate Roth IRA TRUSTS , in which the Roth IRA money is transferred to, when we are alive. The trustees can then hold, manage, invest, and reinvest, and distribute the net income and principal and income as we stipulate in our Roth IRA Trust for the benefit of my wife and me when we are alive and we ever need this money. After our deaths, the money in the Roth IRA Trusts is then distributed equally to the benefit of our children and grandchildren, as Roth IRA’s, as directed in our Roth IRA Trust instructions, ie withdrawing the minimum distributions as dictated by IRA regulations or any other conditions we incorporate in the Trust directives.CAN Roth IRA’s even be put into a separate Roth IRA trust ?
B Leave the money as is and let the money remain in our individual Roth IRA’s and we assign the primary beneficiary to our children or grandchildren as we fit, assuming they will do the right thing.
We will appreciate if anybody has created trusts for Roth IRA’s and if it is legal.
Permalink Submitted by Alan - IRA critic on Fri, 2015-03-13 18:37
Yes, a Roth IRA can be left to a trust just like a traditional IRA. The difference is that it is more critical for the trust to be qualified for look through treatment since a Roth owner is deemed to pass prior to the required beginning date. That means that whatever age the owner passes at, if the trust is not qualified, the 5 year rule will apply. You must name the trust as beneficiary on the IRA agreement or as contingent beneficiary in case the primary spousal beneficiary pre deceases the owner spouse. Be sure to use a trust attorney who specializes in this area to draft the trust or trusts to include the provisions you want.
Permalink Submitted by Bruce Steiner on Sun, 2015-03-15 02:39
See my article on trusts as beneficiaries of retirement benefits: http://www.elderlawanswers.com/Documents/Trusts%20as%20Beneficiaries%20of%20Retirement%20Benefits.pdf.
Permalink Submitted by [email protected] on Mon, 2015-03-16 14:02
A. can’t be done, you can’t assign an IRA to a trust while you are alive without liquidating and putting the proceeds into a trust.B. can be done, but you could also name a Trust as bene, which is what Alan and bsteiner are giving you information on.