How to Transfer a Roth IRA to a Living Trust

Transfer tax-free dollars from a Roth IRA to a trust for your beneficiaries.

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Investors fund Roth Individual Retirement Accounts (IRAs) with after-tax dollars to provide income during retirement. However, savvy investors are transferring Roth IRAs to a trust for beneficiaries. Investors with a Roth IRA are getting the most out of their Roth by naming a living trust as the heir, which acts as a conduit that transfers Roth payouts to heirs after death. Setting up a trust like this is called “stretching an IRA.” Naming a living trust as the heir to a Roth IRA is one way to ensure full benefits are received and wealth is transferred to beneficiaries tax-free. Annual minimum payouts to the beneficiaries of the living trust are based on the life expectancy of the oldest heir.

Step 1

Create a living trust with an estate planner. Choose the name of the trust and assign a trustee to oversee the living trust. Any reference to the trust in writing must be represented exactly and consistently on all transactions. Exercise caution when choosing a name and referring to the living trust in the future.

Step 2

Assign beneficiaries of your Roth IRA. The trust administrator can provide you with documents to assign heirs. To properly identify beneficiaries in the form, you will need the individuals’ legal names, current addresses and their Social Security numbers.

Step 3

Fill in any separate section included in the beneficiary form that designates a living trust as the beneficiary. By assigning a living trust as a beneficiary of the Roth IRA, using the exact name of the trust you chose at its creation, you prepare for a future transfer of the Roth into the living trust. If you hired an estate attorney, this paperwork will be completed for you. The document becomes legal when you sign and date the form and submit it to the Roth IRA trust administrator for recording.