Making a trust the beneficiary of a Roth IRA
Is it possible to make a trust the beneficiary of a Roth IRA and subsequently leave the Roth funds in the trust for an indefinite period of time – 25 years for example.
At the end of the initial 10-year period the trust would pay the taxes on the Roth IRA. Afterwards, could the trust make an annual tax-free gift (currently the limit is $15,000) to whomever is named in the trust, therefore eliminating the 10-year restriction for the beneficiaries?
Is there a limit on how long a trust can exist?
Permalink Submitted by Alan - IRA critic on Tue, 2020-01-21 17:36
The 10 year rule only affects the distribution of the IRA, not the length of an accumulation trust. The Roth IRA will be qualified, therefore the distribution to the trust will be non taxable. The trust can then retain this distribution and the only taxes due will be on investment income earned in the trust after the Roth distribution. The trustee of the trust may have discretion within certain limits when distributions will be made to the beneficiaries. These are not gifts, just distributions. Trusts can last for many years after the trustor passes, but there may be a limit on perpetual trusts that varies by state.