What's the best strategy for a non-spouse beneficiary (ex: adult children) to inherit Roth IRA/Roth 401k funds with a trust in mind (trust would be listed as beneficiary of retirement account)?
a) Years 1-10 --> Does beneficiary (adult child/children) get the account retitled as an "inherited IRA" after death and keep the new account within the decedent's Retirement plan for ~10 years for ideal tax-free compounded growth, and then draw it down entirely in Year 10 tax-free?
b) After Year 10 --> Does successor trustee open a brokerage type account as allowed by the trust to benefit the beneficiary? How are earnings/growth taxed in this new brokerage account? If earnings/growth is accumulated inside the trust, I assume the beneficiary pays the higher trust taxes annually if not distributed to the beneficiary in the same year. How about if earnings/growth is distributed to the beneficiary within the same year, are they taxed at the beneficiary's lower personal tax bracket, as short-term capital gains? How can one best reduce taxes during the draw down after Year 10?
c) Are there other better (more tax-efficient) options to house the tax-free Roth monies after Year 10 if the funds are not needed immediately?
a) Years 1-10 --> Does beneficiary (adult child/children) get the account retitled as an "inherited IRA" after death and keep the new account within the decedent's Retirement plan for ~10 years for ideal tax-free compounded growth, and then draw it down entirely in Year 10 tax-free?
b) After Year 10 --> Does successor trustee open a brokerage type account as allowed by the trust to benefit the beneficiary? How are earnings/growth taxed in this new brokerage account? If earnings/growth is accumulated inside the trust, I assume the beneficiary pays the higher trust taxes annually if not distributed to the beneficiary in the same year. How about if earnings/growth is distributed to the beneficiary within the same year, are they taxed at the beneficiary's lower personal tax bracket, as short-term capital gains? How can one best reduce taxes during the draw down after Year 10?
c) Are there other better (more tax-efficient) options to house the tax-free Roth monies after Year 10 if the funds are not needed immediately?
Statistics: Posted by Hi10Lo5 — Tue Sep 17, 2024 11:40 am — Replies 1 — Views 124