WHEN YOU SHOULD NAME A TRUST AS IRA BENEFICIARY

By Sarah Brenner, JD
Director of Retirement Education

Here at the Slott Report we hear many stories about trusts being named as IRA beneficiaries and the problems that follow. Often, there seems to be no purpose for naming the trust and it brings unnecessary complications. Trusts won’t help with income taxes. In fact, they can increase the tax hit because IRA funds may be subject to high trust tax rates.

Naming a trust is not something that should be done without a clear purpose. Here are six good reasons to name a trust as an IRA beneficiary:

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Q: I am over age 59½ and have had a Roth IRA account for more than 5 years. Starting in 2025, I designated all of my contributions into my employer’s 401(k) plan as Roth contributions. If I decide to retire before I have met the 5-year requirement for the Roth 401(k) and roll over this balance to my existing Roth IRA account, which 5-year clock applies to those former Roth 401(k) dollars?

Answer

Q: I am age 85, and my wife is age 75. If I die first and my wife inherits my IRA, are the required minimum distributions (RMDs) that my wife must take after my death calculated using her age or my age?

Answer

Q: I have two IRA annuities with different insurance companies. One of my annuities is maturing and I would like to transfer it upon maturity to a different insurance company. Do I need to take my 2025 required minimum distribution (RMD) from the current insurance company prior to transferring the funds to a new insurance company offering a higher rate, or can I take it after the transfer?

Answer

Q: I have a question concerning inherited Roth IRAs. I know that in the past you have said that no annual required minimum distributions (RMDs) are required for these accounts. Does this include Roth IRAs that were inherited prior to the SECURE Act changes?

There is so much confusion about Roth IRA RMDs, so I wanted to be sure.

Answer

Have a question for America's IRA Experts?
Email your questions to us at [email protected]. Selected questions will be featured every Thursday in the Slott Report.

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