Roth IRA Moved to a Trust

Submitted by Marina Ferrone on Thu, 2017-10-12 17:14

If the holdings in the Roth IRA were moved over in-kind to a trust:

1) Are there any tax consequences as a result of this in-kind transfer?
2) Are there any tax consequences if any of the current holdings in the trust are sold?
3) Are there any tax consequences on the underlying growth of the assets in the trust?



Submitted by Alan - IRA critic on Thu, 2017-10-12 18:07

  1. If you did this as the Roth owner, it would be a taxable distribution from the Roth IRA, although under the Roth IRA ordering rules for non qualified distributions, most of the distribution would probably be a non taxable return of contributions. Termination of the Roth IRA in this manner does not make any sense. Upon owner’s death, if the beneficiary of the Roth is a trust, then there is no taxable event from inheriting the Roth other than RMDs.
  2. The basis of holdings transferred to a trust following a Roth distribution is the holdings value on the date of the Roth distribution. Trust could then sell under cap gain rules.
  3. Could be current taxes on cap gain distributions or qualified dividends, otherwise not until holdings sold.

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