Answer--The Roth IRA participant is permitted to change his "designated beneficiary" after age 70%, and have that change be effective for determining minimum required distributions
after his death.
The minimum required distribution
rules that are applicable to a traditional IRA or qualified plan account are also applicable to a Roth IRA after the owner's death.
In some cases, however, the fiduciary accounting income may exceed the minimum required distribution
for the first few years, in which case Revenue Ruling 2000-2 will allow for greater deferral of income.
The proposed regulations on how to calculate the minimum required distribution
for a participant in a qualified retirement plan or IRA allow much flexibility.
Alternatively, a discretionary or "accumulation" trust also provides asset protection while also allowing the trustee discretion in making minimum required distributions
Due to the state of the economy in 2009, the provisions mandating RMDs from traditional IRAs and pension plans were suspended; it is important to keep this in mind when considering the following example involving minimum required distributions
and a recharacterization.
Not only must longevity be taken into consideration, but both minimum required distributions
(MRDs) and unrequired distributions (monies needed to sustain your lifestyle) are important factors.
If funds are left to accumulate after age 70V, the 50 percent excise tax on undistributed minimum required distributions
must be avoided.
If funds are left to accumulate after age 70 1/2, the 50% excise tax on undistributed minimum required distributions
must be avoided.
For instance, if the trust is for the benefit of a grandchild, the IRA could potentially have 40 or more years of additional tax-free compounding since the minimum required distributions
are based upon the life expectancy of the beneficiary.
What's more, after age 70 1/2 you must take minimum required distributions
(MRDs) from your IRA, even if you don't need the money.
This exclusion is available for taxable Roth IRA distributions as well as minimum required distributions
from a traditional IRA through 2007.