dmertz
Level 15

Retirement tax questions

@NCperson , thanks. I totally missed that.

 

If B is named directly, it would be up to B to name a successor beneficiary.  If B is the only primary beneficiary and predeceases A, then the beneficiary would be the contingent beneficiary which could be the trust.  If your intent is to also control who inherits if B dies after you or whether or not B could entirely drain the Roth IRA, you would have to make the trust the primary beneficiary and have the terms of the trust control the distributions from the trust to B and C.

 

As long as the Roth IRA is qualified by the time any earnings would have to be distributed, which is likely, the higher tax rates generally paid by trusts would not be a factor on distributions from the Roth IRA.  Any RMDs from the Roth IRA could be held in the trust and funds distributed from the trust according to the terms of the trust without any tax consequences other than those on any earnings on the assets outside the Roth IRA but still in the trust.  If the trust is the primary beneficiary, is qualified for look-through and neither B nor C predeceases A, I don't think that the IRS has yet provided guidance that clarifies how RMDs from the Roth IRA are determined in the case where either B or C is an Eligible Designated Beneficiary).  If neither B nor C is an EDB, the 10-year rule would apply as long as the trust was qualified for look-through.