Trust as IRA Beneficiary

Submitted by W Dobroski on Sat, 2022-11-12 20:59

If a Trust is an IRA Beneficiary and per allowed provisions, it’s decided to voluntarily dissolve the Trust,
how would the 2 separate Trust beneficiaries then become direct beneficiaries of the IRA without
jeopardizing the continuation of the Roth IRA itself?

Would that be via some required action by the Trustee?
or via prior IRA (eg contingent) beneficiary designation?
or ?

Also, if it’s preferred that the Trust go into sub-Trusts upon the grantor’s death, does that create any
substantial complications if a Trust is the IRA Beneficiary, including complications re properly titling
the Inherited IRA?

Thanks



Submitted by Alan - IRA critic on Sun, 2022-11-13 00:45

  • I assume “allowed provisions” means that the trust is qualified for look through. If the trust beneficiaries are all non disabled individuals, the 10 year rule applies for purposes of the inherited Roth RMDs. No annual RMDs are required since the owner passed prior to RBD. It does not matter whether the trust splits into sub trusts or not.
  • If the trust provisions also allow the trustee to dissolve the trust or distribute the inherited Roth out of the trust to the trust individual beneficiaries, the trustee can do this by non taxable direct transfer if the Roth custodian cooperates. Some custodians do not cooperate, and if they cannot be convinced based on prior IRS PLRs, the inherited Roth will need to be transferred to another custodian that will cooperate. As such, each trust beneficiary can set up their own inherited Roth IRA to receive their portion of the inherited Roth IRA. This provides individual account control for each beneficiary but does not alter the RMD rules that applied to the trust. Each inherited Roth beneficiary will still be subject to the 10 year rule.

Submitted by W Dobroski on Sun, 2022-11-13 00:54

That’s a great help, Thanks Alan

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