Estate as Bene
Hello. just met with a client and estate attorney. Client has a sizeable Roth IRA and would like to leave 1/3rd to spouse and 2/3rds to two kids. Kids are mid 20’s. My suggestion was to simply naming these people as bene’s. The attorney is suggesting naming spouse for the 1/3rd and the estate for the other 2/3rds. The attorney is saying the estate can inherit and let it grow for 10yrs in the Roth and then kick it into the estate after year 10. Am I correct on assuming the new 10yr rule wouldn’t apply to estate’s and the 5yr rule would still apply?
Permalink Submitted by Alan - IRA critic on Tue, 2020-03-10 18:05
You are correct, because a Roth Owner is always treated as passing prior to the RBD, since there is NO RBD for a Roth IRA. Therefore, the kids would end up with only 5 years, even worse than the 10 year rule. Also, with multiple beneficiaries, the spouse cannot elect to assume ownership or default to ownership, so there will be extra pressure to do the spousal rollover ASAP, actually a direct transfer to her own Roth IRA to avoid exposure to the one rollover limitation per 12 months. Not a good suggestion by the estate attorney, either pre Secure or post Secure.