|
|
|
|
|
I believe you can set up a trust to be the beneficiary of a Roth IRA and on the death of the owner distributions could be payable to the trust based on the lifespan of the eldest beneficiary of the trust. Distributions from the trust to the beneficiaries could be based on factors determined by the trust.
At the death of the owner the value of the Roth IRA could be sheltered by the estate tax exclusion. (hopefully 3.5mm or more).
Assuming all of the beneficiaries of the trust were grandchildren the trust would be a skip person.
What I don't understand, and can't seem to find, is how and where the GST exemption is applied. Is it applied to the value of the IRA at death and allocated on Schedule R? There is no transfer until the IRA makes distributions to the trust.
Can anyone point me to something that speaks to this? Or correct my understanding or misunderstanding?
Thanks for your input.
Richard Cassidy, CPA
|
|
|
|
|
|
|
Hello Richard:
It is applied to the value of the IRA on Form 706 and allocated on Schedule R. On Schedule R, you name the trust, give its EIN and say how much you're allocating but you don't specifically identify the assets. If you don't use the Schedule R - there is an automatic GST allocation at death. First to direct skips, then prorata to all trusts.
It's always confusing to me when using an IRD asset to fund a trust because it's both principal and income, The fact that the Roth distributes nontaxable income doesn't change the GST treatment.
However, I can't think of any source to point you to that supports my conclusion.
|
|
|
|
|
Power Member
Group: Forum Members
Last Login: 2/16/2010 6:30:43 PM
Posts: 144,
Visits: 809
|
|
I'm responsible for the last post. I didn't realize that I wasn't logged in.
Mary Kay Foss
|
|
|
|
|
|
|
Thanks Mary Kay. I appreciate the input. I think I had the same conclusion but was just having a mental block. Its good to have another opinion.
Thanks again.
Richard Cassidy
|
|
|
|