October 11, 2021 1:25 am

Spouse, Sole Beneficiary of a Trust, May Roll Over Roth IRA to Her Own Account

A surviving spouse who inherits an IRA, including a Roth IRA, may roll over the funds to his/her own IRA. Doing so allows the surviving spouse to name his/her own beneficiaries and postpone IRA distributions until attaining the distribution age (72 for those born after June 30, 1949) or, for Roth IRAs, avoiding lifetime distributions. But what if the IRA is payable to a trust?

In one situation, the surviving spouse and decedent-Roth IRA owner established a trust, with each as trustees and beneficiaries. When the decedent died, his Roth IRA was payable to the trust. The surviving spouse, acting as trustee, wanted to distribute the funds to herself and roll them over to her own Roth IRA. The IRS ruled privately that she could do so (Letter Ruling 202136004). Because she was entitled to receive all of the trust’s assets under the terms of the trust, she is effectively the individual for whose benefit the Roth IRA is maintained.

Tax Glossary

Capital gain or loss

The difference between amount realized and adjusted basis on the sale or exchange of capital assets. Long-term capital gains are taxed favorably. Capital losses are deducted first against capital gains, and then again up to $3,000 of other income.

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