Roth Ira Beneficiary Distribution

Summary

Under the SECURE Act, non-spouse beneficiaries must withdraw inherited Roth IRA funds within 10 years. This rule doesnt apply to other cash assets. In Michigan, trust provisions can specify asset management until a beneficiary reaches a certain age or the 10-year deadline. Trusts can allow beneficiaries to choose continued trustee management within legal limits. Open-ended language can accommodate future legal changes. Separate sections for death of grantor and residuary assets provide clarity. Ensure headings accurately reflect content for effective trust management.

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Michigan
In Michigan, under the SECURE Act, non-spouse beneficiaries must withdraw the entire balance of an inherited Roth IRA within 10 years of the original owner's death. Exceptions include minor children, disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the decedent.
Do you need assistance with understanding any exceptions?
Does this *-year requirement also apply to other cash assets such as CDs savings accounts checking accounts or non-tax advantaged IRAs
The *-year requirement under the SECURE Act specifically applies to inherited IRAs, including Roth IRAs. It does not apply to other cash assets like CDs, savings accounts, checking accounts, or non-tax-advantaged IRAs.
Do you have any specific concerns about how to manage these other assets as a beneficiary?
Can you give example of the wording for provisions to be added to a revocable living trust which describe that the trustee should manage assets until the beneficiary reaches a minimum age but also with the acknowledgment of the secure act *-year maximum deadline?
Sure, here's an example of wording you could use for provisions in a revocable living trust:
- The Trustee shall manage and control the Trust assets until the Beneficiary reaches the age of [minimum age].
- In accordance with the SECURE Act, any inherited Roth IRA assets must be fully distributed within 10 years of the original owner's death.
- The Trustee shall make periodic distributions to the Beneficiary as needed for their health, education, maintenance, and support, while ensuring compliance with the *-year maximum deadline for inherited IRA distributions.
Would you like assistance with anything else?
You added to the last provision allowing for periodic distributions which I did not ask for. Does this mean there is a requirement for periodic distributions or can I specify in the trust that there will be no distributions until they reach the minimum age or the secure act *-year deadline is met, whichever comes first. Yes
In your trust, you can specify that there will be no distributions until the beneficiary reaches the minimum age or the SECURE Act *-year deadline, whichever comes first. There is no legal requirement for periodic distributions if not desired.
Would you like help with any other legal provisions?
Is this type of verbiage typically used in a revocable living trust to accommodate this intent or is there's some other wording that is typically used?
You can use the verbiage provided or modify it to suit your specific needs. Here’s a streamlined example:
- The Trustee shall manage and control the Trust assets until the Beneficiary reaches the age of [minimum age] or until the SECURE Act *-year deadline is met, whichever comes first.
Would you like any further assistance with your trust provisions?
Is it also common that the trust provisions allow for the beneficiaries to choose to have the trustee continue to manage all or a portion of The distributions beyond the indicated age but not past the secure act *-year limitation?
Yes, it is common for trust provisions to allow beneficiaries the option to have the trustee continue managing all or a portion of the distributions beyond the indicated age, but not past the SECURE Act's *-year limitation. This flexibility helps accommodate individual circumstances and preferences.
Do you need assistance drafting this provision?
Yes. Could you give me an example of a provision wording to allow for this?
Here's an example provision to allow the trustee to manage assets beyond the indicated age but within the SECURE Act's *-year limitation:
- The Trustee shall manage and control the Trust assets until the Beneficiary reaches the age of [minimum age].
- Upon reaching the minimum age, the Beneficiary may choose to have the Trustee continue managing all or a portion of the distributions, provided that the entire balance of any inherited Roth IRA assets is distributed within 10 years of the original owner's death in accordance with the SECURE Act.
Would you like any assistance with another provision or any other legal matter?
In the wording that I have drafted, I avoided using a specification of 10 years and also avoided naming the secure act but instead simply stated that the trustee should distribute to each beneficiary upon the lesser of the age of 45 years old or the greatest number of years required by law for minimum distributions. This way it seems to me that it is open-ended to allow for the law to change rather than identifying a specific law and its stipulations which could later become inaccurate.
Your approach to leave the trust provisions open-ended is a sound strategy to accommodate future changes in the law. Here’s a streamlined example of the wording:
- The Trustee shall distribute assets to each Beneficiary upon the lesser of the age of 45 years old or the greatest number of years required by law for minimum distributions.
Would you like help with any other legal matters?
In the current template that I'm using from Rocket Lawyer for a revocable trust it has a section called death of Grand tour and says upon the death of the grantor and after the payment of the Grand tours just debts funeral expenses and expenses of last illness the following distributions shall be made. Then it follows with another section titled residuary assets and a statement that reads the residuary assets of this trust shall be distributed to or retained by the following beneficiaries as indicated below. It seems to me that the statement of residuary assets should be incorporated into the statement after the heading death of grantor. Does this make sense or should the section for residuary assets be held separately.
It makes sense to keep the "residuary assets" section separate. The "death of grantor" section covers immediate expenses and specific distributions, while "residuary assets" deals with remaining assets after those obligations are met. Keeping them separate provides clarity and better organization.
Would you like help with any other trust-related provisions or legal issues?
I edited the template under death of Grand tour where it specifies the percentage of distribution to each beneficiary, I separated this section into two areas, One titled cash value and one titled remaining cash value in physical assets. Under the cash value section I listed two beneficiary names and proceeded their names with the statement, the lesser of *.*% or $*,*. In the second section titled remaining cash value and physical assets I listed three beneficiaries each proceeded with a stated fraction of */*. The description text under the heading titled remaining cash value in physical assets, I put the text that we have discussed above regarding distributions at a minimum age or as directed by the secure act. So far does this generally sound acceptable?
Yes, your separation into "cash value" and "remaining cash value in physical assets" sections sounds acceptable. This organization can provide clear instructions for the trustee and beneficiaries. It's a good idea to keep your instructions clear and specific to ensure the trust is managed as intended.
Would you like assistance with any other sections or legal provisions?
There was a misunderstanding in the heading that I gave you and it must have read remaining cash value in physical assets. You just said this is acceptable but it certainly is not acceptable because it should have read remaining cash value and physical assets, not in physical assets. These two have different meanings and only one of them is acceptable so I am surprised that you would say that the incorrect version is also acceptable.
Thanks for clarifying! The correct heading should indeed be "remaining cash value and physical assets" to accurately represent both aspects separately.
Would you like further assistance with any other sections or details in your trust document?