dmertz
Level 15

Retirement tax questions

I think you mean trust beneficiary, not the trust settlor.   The trust settlor would be the owner of the IRA, so the trust settlor can't be a beneficiary of the IRA (nor can the trust settlor be a beneficiary of the trust since the trust settlor will be dead).

 

What would be the purpose of adding the complication of making the trust the beneficiary unless the trust provides restrictions on the distributions from the trust to trust beneficiaries or is intended to specify successor beneficiaries?  The beneficiary designation for the IRA can include multiple primary beneficiaries and can include multiple contingent beneficiaries that would apply if all of the primary beneficiaries predecease the IRA owner.  Some IRA custodians also allow even more complicated custom beneficiary designations.

 

Making a trust the beneficiary rather than making individuals the beneficiaries adds requirements for the trust to be able to look through to determine RMDs for the Roth IRA rather than being subject to the 5-year rule and if there are multiple beneficiaries the separate accounts rule would not apply for determining RMDs.  If the beneficiary would be the IRA owner's spouse, making the trust the beneficiary would also add substantial complications in the surviving spouse to be able to treat the Roth IRA as the surviving spouse's own.