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Roth Beneficiary

Guest Upland

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I think that I understand why my spouse rather than our

trust ought to be the beneficary of my regular IRA

What about my Roth IRA


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This is a much tougher topic and depends on your own circumstances. While you are living you are not required to take distributions from your Roth. However, when you die, your beneficiary must begin to take from the account.

Like a traditional IRA, your spouse can roll the Roth IRA over to her own Roth IRA and treat it as her own. She can name new beneficiaries and, most importantly, she, as the owner of this Roth IRA, is not required to take any funds from the Roth IRA during her lifetime. That will fall to her named beneficiaries. So if you want to allow the Roth IRA to grow for your kids and grandchildren for as long as possible, name your spouse.

However, naming a trust should also be considered if you want to control the assets, rather than your spouse, or your kids are too young to handle the funds right now. When the funds are paid to the trust from the Roth IRA, assuming the account has aged for 5 years, the distributions are income tax free. This allows you to fund a credit shelter trust with 100 cents on the dollar, rather than diminishing the account by income tax due. Also, if you follow the rules, you will be able to look through the trust to the individual beneficiaries and pay the funds from the Roth IRA to the trust over the life expectancy of the oldest beneficiary, i.e. probably your spouse. Thus, the deferral can continue over the same period of time. You also do not have to be concerned that the tax rates applicable to income paid to a trust reach the top bracket so much quicker than for an individual, because there will be no income tax to be paid by the trust on its receipt of the Roth IRA funds.

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