ROTH MRD’s TO TRUST

Submitted by Herm Brames on Fri, 2016-08-26 17:26

If a ROTH IRA owner passes and if an Accumulation Trust (which meets all requirements for look through) is the beneficiary of their ROTH and only a portion of the annual MRD received by the Trust is to be distributed to the named Trust beneficiary annually, does the undistributed portion of the MRD in the Trust maintain the tax free status for later distribution from the Trust? To the named primary beneficiary only or also to a younger beneficiary named by in the Trust document after passing of the original beneficiary? Are earnings from investments of those retained funds in the Trust taxed at Trust rates when earned or to the beneficiary when distributed?

Attempting to learn as much as possible prior to engaging Estate/Trust attorney.



Submitted by Alan - IRA critic on Fri, 2016-08-26 19:40

The accumulated portion of a Roth IRA distribution will remain trust principal for both the beneficiary and successor beneficiaries of the trust and will not be taxed later on. Of course, earnings generated on these retained dollars within the trust (after Roth IRA distribution) will be taxable at the higher trust rates if not distributed currently. If distributed currently, those earnings will be taxable at the beneficiary’s tax rate.

Submitted by Ben Meyer on Sat, 2016-08-27 00:34

  • For an accumulation trust that receives RMD from an inherited Roth each year, how is the taxable portion determined for an inherited Roth that is not yet qualified?  The taxable portion is reported on line 8 of form 1041.  Since form 8606 is not for use with the fiduciary return form 1041, is Part III merely used as an informal worksheet or guideline for determining the taxable portion?
  • For the non-taxable portion of an IRA RMD, form 1041 seems to have no equivalent to line 15a of form 1040, for reporting a non-taxable amount.

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