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Trust & Roth IRa

Probably an easy question. Does a trust where the only asset is a Roth IRA need to file taxes? 

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4 Replies
ThomasM125
Employee Tax Expert

Trust & Roth IRa

Assuming there was no taxable income and the gross income is less than $600 per year then you would not have to file a trust tax return. There can be taxable income from a Roth IRA if there is a premature distribution (made before age 59 1/2) or a distribution less than five years from the date contributions were first made. In those instances, any distribution of earnings would be subject to tax and penalties.

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dmertz
Level 15

Trust & Roth IRa

A distribution payable to a trust would be after the death of the participant, so there would be no age requirement for determining if the distribution was a qualified distributions.  Only the 5-year holding period would then apply in determining whether a distribution of earnings from the Roth IRA to the trust would be taxable.

Trust & Roth IRa

@ThomasM125 The only asset in this trust is an Inherited Roth IRA and the trust qualifies as a "see-through." I would guess that the best course of action would be to leave the Roth IRA alone for the 10 year period and do lump sum distribution at the end. Furthermore, there would be no need to file taxes because the Roth IRA is not taxable income.  Do the dividends earned by the Roth IRA which are then reinvested count toward the $600 gross income threshold? All of the trusts assets remain in the Roth IRA account and never exit the account.

dmertz
Level 15

Trust & Roth IRa

"do the dividends earned by the Roth IRA which are then reinvested count toward the $600 gross income threshold?"

 

No.

 

If the terms of the trust permit, the inherited Roth IRA maintained for the benefit of the trust could be assigned out of the trust to inherited Roth IRAs maintained for the benefit of the trust beneficiaries and the trust could be terminated.  Of course if the intent is to not make any distributions until year 10 (when certainly any distribution would be a tax-free qualified distribution), it's probably no extra effort to maintain the trust until then.

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