Naming a Revocable Trust as Your IRA Beneficiary: Smart Strategy or Tax Mistake?

Let's say you've done everything right so far. You've saved diligently in your IRA, built a comfortable retirement nest egg, and even set up a family trust to avoid things like probate and streamline your estate. And then, because it feels like the safe and responsible thing to do, you name your trust as the beneficiary of your IRA. But here's the problem. In the post-SECURE Act world, naming a revocable living trust as the beneficiary of an IRA can unintentionally trigger a tax disaster for your beneficiaries. Instead of a steady stream of income over a lifetime, they may be forced to drain the account and pay taxes on the entire balance over just several years at some of the highest tax brackets. We're talking about six or even seven-figure IRAs being distributed in ways that not only defeat your estate planning goals but also crush your heirs with avoidable taxes, all because of some tax law changes you might not have even been aware of. This isn't theoretical. It's happening right now. And with compressed trust tax brackets, a badly structured trust can push your retirement dollars into the 37% tax bracket, sometimes with just $16,000 of annual income.

[00:01:43]
Hey everyone, and welcome to Retired-ish. I'm your host, Cameron Valadez, partner at Planable Wealth, a wealth management and tax firm in sunny Southern California. At our firm, we hear countless stories about trusts, such as family trusts, aka revocable living trusts, being designated as the beneficiary of people's retirement accounts, like IRAs. Then what happens is they call us after the problems that typically follow with doing that. More often than not, when reviewing their intentions and their documents, there seems to be no legitimate purpose for naming the trust as the beneficiary. Such as wanting control over the IRA money after death so that your child doesn't blow it on a Ferrari or something, or protecting the benefits of a disabled beneficiary, naming the trust just ends up creating unnecessary complications and costs. So, in other words, many people have relatively straightforward estate plans where they fully trust their beneficiaries with the money. They aren't worried about any post-death control of at least the retirement money, and they just got a trust simply to keep affairs private and avoid probate, which is totally fine. But think twice before just hitting the easy button and putting your trust as the beneficiary of your retirement accounts.

And I just want to set the record straight by saying revocable living trusts do not help with income taxes in any way. In other words, there are no tax advantages that can be had with a revocable trust that can't be had without. In fact, they can increase the tax hit when retirement accounts are involved because IRA funds may be subject to high trust tax rates, which we'll get into a little bit later. This, of course, depends upon the situation. Again, that's what we're here to dive into today. Naming a trust as the beneficiary of your retirement accounts is not something that should be done without a very clear purpose.

[00:03:54]
Before we dive in, I want to remind you that we are talking about trusts and taxes. As simple as I wish I could make some of these concepts, I can only do so much when we get into the complicated stuff. Hang in there with me. Rewind it a few times if needed. Because if you have retirement accounts, you have a revocable living trust, or aka a family trust, and there are people that you care about. You need to have at least a basic understanding of this stuff. Don't just rely on your attorney to reach out to you when things need to change and they need to update your trust documents. And also don't rely on your old trust that you might have that hasn't been updated in over a decade, because it likely does need to be updated.

Okay, first, I want to go over with you why naming your trust as the beneficiary of your IRA actually does make good sense, or can make good sense. Then we will get into the potential issues with doing so, which is where things get a little muddy and complicated.

The first reason is for special needs beneficiaries. For special needs beneficiaries, a special trust is basically necessary to effectively manage money on their behalf and to protect any potential government benefits they may receive or be entitled to in the future when IRA funds might be inherited. At the same time, a special needs trust that's drafted to comply with the new SECURE Act and SECURE Act 2.0 rules can still use what we call the lifetime stretch for the required minimum distributions on those inherited IRAs instead of the 10-year rule. This basically allows payments to be paid out over the life expectancy of the special needs beneficiary. And this can potentially help reduce the amount of inheritance that gets eaten away by taxes.

[00:05:48]
Number two, you may have a blended family situation where you want to be sure that your spouse has access to funds to support him or her if you were to predecease them. But when they pass, maybe you want the retirement money to revert back to your kids from a previous marriage. There might be some use cases there to name the trust.

Number three is if you have any beneficiaries with any kind of maybe substance abuse issues. So no parent or grandparent would want to see their life savings support a beloved child's drug problem or gambling addiction, for example. So by naming a trust as beneficiary, instead of naming the family member with the substance abuse issues directly on the account, controls and instructions can be put in place to help make sure that this doesn't happen. IRA expert Ed Slott once said that they should call these don't trusts in situations like this, and I thought that was pretty funny. And the next reason might be the most common reason to name your trust as a beneficiary of your retirement account. That is when you have minor beneficiaries.

So when there are minor children involved, naming a trust as a beneficiary of your IRA or 401(k) can be a good decision. On the contrary, having a minor named directly on a beneficiary form of the account itself rather than naming the trust can be a recipe for disaster because a minor cannot legally conduct business on the account. It may be possible in some cases to name what we call a UTMA or UGMA account as the IRA beneficiary, which can basically be created at just about any financial custodian out there. But not all custodians allow this. Also, these accounts don't offer the ability to control funds after the minor reaches the age of majority the way that a trust can. They are essentially just a partial band-aid fix, because again, you lose that control. There is no language you can put into those UTMA or UGMA accounts that says, ‘hey, this beneficiary can only receive so much money for these reasons at these ages.’

[00:08:08]
Once they hit that age of majority, whether it's 18 or 23 or whatever, depending on the state you live in, they're going to have free rein to kind of do whatever they want. And this is especially the case with larger IRAs when minors are involved. Naming a trust as the beneficiary might be absolutely necessary in those cases. Just don't forget to update the beneficiary designations on your IRA once your minor beneficiaries become adults and you're still alive. You may want to amend your trust in those cases, too.

Next are potentially vulnerable beneficiaries or those who are simply just bad with money. There's no shortage of con artists and telephone and Internet scammers looking to take advantage of vulnerable or naive beneficiaries with large inheritances. To protect these loved ones, naming a trust as the IRA beneficiary may be extremely useful for limiting access and fending off people out there with bad intentions.

Number six. Then, of course, we have creditor protection concerns. Inherited IRAs are not protected under federal law, whether that's from bankruptcy or from other creditors. However, there is some protection likely under your state's specific laws, which all differ by the way, so be careful there. Depending on the state, a trust might help shield IRA funds from the beneficiary's creditors.

And last but not least, you may have divorce concerns for your beneficiaries, such as your kids. While most people love their children and grandchildren, they may not feel as kindly towards the spouses that their kids wind up finding. We've definitely seen our fair share of this scenario in client consultations over the years.

[00:010:00]
There may be concerns about money ending up in the wrong hands if marriages go south and there is a divorce. So, just know that divorce laws vary from state to state, and a trust may not be necessary for this kind of protection, but a trust named as an IRA beneficiary might alleviate these concerns in some circumstances.

All right, now let's discuss some of the potential issues with naming a trust as the beneficiary of your retirement accounts. And I'm going to focus on pre-tax retirement accounts for now, so traditional IRAs, 401(k)s, 457 plans, things like that. So let's say that you've determined that a trust is the only way to go given your wants and circumstances.

The first thing to figure out is whether or not your trust qualifies as what the IRS calls a see-through trust, sometimes also referred to as a look-through trust. The reason why this is important is because if your trust does qualify, then the beneficiaries of your trust will be treated under the tax law as designated beneficiaries. Oftentimes, families such as adult children and grandchildren are the beneficiaries of these revocable living trusts, in other words, non-spouses, and more often than not, they will be subject to the 10-year rule when it comes to taking those required minimum distributions or RMDs that come from inheriting a pre-tax retirement account. This rule refers to the fact that certain beneficiaries have 10 years to fully deplete and pay taxes on the money inside the pre-tax retirement account. Basically, there's an RMD of 100% of the account, and the longest you can wait is 10 years to take it. The IRS wants its tax dollars.

[00:012:00]
There are also some circumstances now where a portion is due in each of the years one through nine. But I digress. That's for another episode. Another side note, this 10-year rule exists for Roth IRAs as well, but it can work slightly different. We'll get into that later. For these types of beneficiaries, the 10-year is essentially the best case scenario because it allows for some wiggle room for them to do some tax planning. Now, please know that there are, however, some beneficiaries that get kind of an exception to this and won't be subject to the 10-year rule in the same way. So these are like spouses, minors, and those disabled per the IRS rules, etc. These are called eligible designated beneficiaries, and they receive even better treatment that allows them to take the money over a longer period of time, which offers more tax planning opportunities.

Now, if the trust does not qualify as a see-through trust, then the beneficiaries will have to withdraw and pay tax over an even shorter time period and therefore with larger sums of money, which can cause a tax nightmare, which again we'll get into in a minute. So generally speaking, what does your trust need to qualify as a see-through or look-through trust? Well, there are a few things. The trust must be valid under state law. Think, for example, if you got a trust most of the way done, but you never signed it, that wouldn't be valid. The trust must be or become irrevocable at death, meaning it kind of gets locked up. Nobody can change it. I would say most revocable living trusts I see become irrevocable at death. But always check with your estate attorney just to be sure.

[00:013:57]
Next, the beneficiaries of the trust must be identifiable, right? So we need like an actual name of an individual, for example, that you can't have the trustee choose beneficiaries by their own discretion at that period in time. Lastly, and listen up because this is an important distinction. If the account, the IRA, in this case, is an employer plan, like a 401(k) or 457 plan, something like that, 403B. Then, after death, the trustee of the trust has to provide either a full copy of the trust or a detailed list of beneficiaries as of September 30th of the year following the owner's death. And the conditions of entitlement need to be given to them by October 31st of that year. For IRAs, so not employer plans like 401(k)s, 403Bs, 457s. For IRAs, all requirements are the same. With the exception of that last one I just mentioned. The trustee does not have to send in any trust documentation to the custodian, aka the company that's holding the funds and the investments. So again, with an IRA, you still have to have a trust that's valid under state law. It has to become irrevocable at death. The beneficiaries need to be identifiable, but no trust documentation needs to be sent. And that is a new provision as of the SECURE Act 2.0.

Okay, then what happens if my trust doesn't qualify as one of those see-through trusts or look-through trusts? Well, the IRS makes this one easy. It is treated as having no designated beneficiary at all, which is no bueno. That means if the owner died before their own RMD age, when they had their own IRA, the entire IRA must be distributed by December 31st of the 5th calendar year following the year of death.

[00:016:04]
In other words, now you, as the beneficiary, only have five years to take this money out. Ouch. We talked about that before. That means bigger chunks of money need to come out within that five years, which could cause more in taxes that ultimately could have been avoided. If the owner died on or after their own RMD age, the age in which they would have had to start taking minimum distributions out, the trust can take distributions over the deceased's remaining life expectancy. This is also dubbed as the ghost life expectancy, unless instead it opts for the five-year rule. This is a little bit different. It can be longer than five years. It just kind of depends on when they passed. What is their life expectancy per the IRS. Right? So if somebody started taking RMDs at age 73 and then they passed away at age 77, their life expectancy could have been and actually is longer than five years. So you get a little bit extra time there, but still, usually that 10-year rule or life expectancy is a lot better.

And lastly, this situation of failing to qualify also means that even if the trust was initially meant to benefit individuals who were those eligible designated beneficiaries, such as a spouse or minor children without a see-through status, the trust cannot stretch those distributions using their life expectancies. This essentially ruins the tax advantages they could have had if things were handled correctly and the trust was designed correctly and had that updated language. So again, that's another big ouch. Don't want to do that. You might be wondering what are some of the more common reasons why a trust would fail to qualify?

[00:018:01]
You know, why would an attorney even draft a trust that doesn't qualify? What I'll say there is, it's usually trusts that are out of date, or if trusts are drafted by people who just don't really deal with retirement accounts and haven't updated this language. It is fairly complicated, and a lot of this stuff is fairly new. So you have to be very careful. But out of the requirements that you need to have in order to qualify, there are some that are a lot easier to meet than others. I think that there are a couple that can trip people up. And the first one is if a trust includes non-identifiable or ineligible beneficiaries, in other words, not named individuals. So, for example, if haphazardly there are charities listed or discretionary beneficiaries, meaning the trustee can choose certain beneficiaries after the death of the owner, based upon what's going on at the time. You can't leave it up to choice for the trustee. You have to name them.

Another one is, and this is very important, it can also fail if the trust does not divide into what we call sub-trusts, which is required if there are multiple beneficiaries, or it lacks the mandated language to get those trusts created. This is kind of a new one from the SECURE Act 2.0. And this is so crucial because again, this was one of the latest updates in the tax code. It's still very new. And essentially, if your trust doesn't have very specific language that terminates the trust upon your death and then splits it into multiple sub trusts for each of the beneficiaries and identifies each beneficiary and how much of the retirement account that they're going to get, then all of the beneficiaries of the trust have to use the least favorable distribution method for those RMDs, even if one or more would have qualified for more favorable methods.

[00:20:06]
Now, I know that sounded insane and very confusing, but here's a simple example. If one beneficiary was, let's say, disabled per the IRS definition, and therefore they are eligible to take those required minimum distributions from the IRA over the remainder of their lifetime and spread the taxes out, basically. But a sibling, let's say, who wasn't disabled was just subject to the 10-year distribution rule. And let's say the trust was missing the required language, then they would both the disabled beneficiary and the non disabled beneficiary have to take their distributions over just the 10 years. This can cause a myriad of issues, of course, especially if tax issues and potentially benefit or public benefit issues for that disabled beneficiary, which, of course, I'm sure you would not want to have happen in that case. Again, this is if the trust does not have language that says it will terminate upon death and split into sub-trusts for the beneficiaries. I mentioned in the beginning that many people have fairly straightforward estate plans where they trust their beneficiaries, and they just want to keep their affairs private, and they want to avoid the costs and headaches of probate for their beneficiaries. They don't really require any specific controls over the use of the funds after they pass.

In these cases, even if you have a trust, it may not make much sense to put your trust as the beneficiary of your retirement accounts. You'll want to consult a knowledgeable professional on this. You don't just haphazardly put it there because it's the easy thing to do.

[00:21:50]
What if you've identified that you absolutely need to use a trust? You need that control from the grave for a particular beneficiary or two, and your trust does qualify as a see-through trust. What are the tax implications here? What should you be on the lookout for? In the case that you need some control after death of the money in those retirement accounts. It can come at a hefty cost. So let's start with the biggest, which is taxes.

You see, in this case, the trust will inherit the retirement account. That means that the retirement account will have those required minimum distributions or RMDs that need to come out of the inherited IRA and are subject to taxation. However, the trust owns the inherited IRA. So when the money comes out of the IRA in a given year, it then immediately sits in the trust. It doesn't automatically shoot out to the beneficiaries because the trust has language in place as to when and how certain beneficiaries can use the money. This is that control aspect. These are often called accumulation trusts and sometimes referred to as discretionary trusts. And to clear up any confusion, a revocable living trust or family trust can also be considered an accumulation or discretionary trust. It's all kind of dictated by the language in the document itself. Those aren't necessarily different trusts than a revocable living trust. They can be both.

When it comes to trusts and taxes, the tax rates that apply depend on whether or not income is retained inside of the trust or distributed out to the individual beneficiaries by the end of each year. If all of the income earned in a given year is retained in the trust at your end, let's say, because the beneficiary is a minor and they're not old enough to be able to make decisions to spend it, then it's taxed at the trust and estate tax rates, which get really high really quickly.

[00:24:03]
If, on the other hand, the income earned is sent out to the beneficiaries each year and is not left in the trust to accumulate, then they are responsible for paying the taxes based on their personal situation and tax rates. And this is typically much better. However, if you want some control of the funds, you don't want your trustee to just send all the money out to the beneficiary immediately in order to save taxes, because then that means you lose the control that would defeat the purpose of the trust in the first place. For example, the trust rates, the trust and estate tax rates, get to 37% with just $15,650 of income in 2025, which is incredibly easy to hit from RMDs alone.

On the other hand, let's say you're a beneficiary and you file your tax return jointly with your spouse. You wouldn't owe 37% in federal taxes unless your combined income was over $693,750 in 2025. The difference between $693,000 and $15,000, that's a massive difference. This is what I mean when I say this control that you might want can get really expensive with these pre-tax retirement accounts.

But it doesn't stop there either. IRA expert Ed Slott makes some other good points when it comes to the costs of IRAs that are held in a trust. He mentions that with a trust, after the IRA owner dies, trust tax returns will have to be filed each year for the life of the trust. And yes, I can attest that this can get expensive because these tax returns aren't that easy.

[00:25:55]
He also mentions that even though this isn't a financial cost necessarily, depending on the specific language and accessibility of the trust, the IRA beneficiaries, potentially your children, are generally locked into the trust terms for life. And as a result, there may be some family resentment against you for leaving your IRA beneficiaries with this kind of legacy, even if you intended it for their own good. And this is perfectly said.

One example I've seen in practice where this could cause some issues is where a gentleman had put in basically a graduating schedule that let his youngest child out of three, and also a minor at that time, access 25% of the funds every five years, but beginning at age 25. So even if this child were, let's say, financially stable and level-headed by age 30, they had to wait until age 40 to access their full portion. The other two children, who were 18 when he first drafted the trust, had no such limitations. They were able to take their share.

So imagine that's you as a parent nowadays. Something happens to you, and your adult child is, you know, all good to go, level-headed by age 30, and today's economy and the housing market, their number one goal is trying to buy a home. If something happened to you, this was their way of being able to buy a home. And maybe that's what you would have wanted for them. However, they now have to wait all the way to age 40 in order to get the funds. So you could see how this can kind of screw with things and not do exactly what you intended.
What about those of you who are charitably inclined? You may say, ‘hey, my trust includes a charity, or more than one charity, as a partial beneficiary of my estate. Therefore, if I don't list my trust as the beneficiary on my retirement accounts, how will the charity receive some of the money?’

[00:28:00]
If you have significant IRA or 401(k) balances and you're charitably inclined, designating charities as beneficiaries directly on these pre-tax accounts instead of through a trust can be highly tax efficient, enabling you to avoid income tax entirely while satisfying your philanthropic goals. Again, this is opposed to naming the charity a beneficiary of your trust, then making your trust the beneficiary of your IRA. Beware of naming a charity as a trust beneficiary. There's a lot that can go wrong here, and it's best to consult a professional.

Not that it's always bad, but when there are retirement accounts involved, just be careful. There may be a better way. A charity is known as a non-designated beneficiary because it does not have a life expectancy. Since a charity has no life expectancy, if it's named as a beneficiary of a trust, a primary beneficiary that is also inheriting an IRA, it can require other remaining trust beneficiaries, such as your children or grandchildren, to take distributions earlier than would otherwise be required and may cause additional taxes. Similar to some of the pitfalls we talked about before. This is where some outside-the-box thinking can save a ton of money in the overall estate for all the beneficiaries. Depending on the magnitude of your charitable intents and the amount of assets you have in pre-tax retirement accounts, notice I said pre-tax, not Roth, instead of naming the charity in your estate plan to receive say 5% pro rata of all of your assets, you could just make the charity a larger beneficiary on your pre-tax retirement account only, such as your IRA. In this case, other non-retirement assets that are in your estate could go to the other beneficiaries and none to the charity. Again, that's just an example.

[00:30:05]
This would be probably the most tax-efficient way to do that in a situation like this, since the charity will receive every dime that you intended and the tax authorities get nothing. Since the charity likely won't owe any taxes on the money from the retirement account, this is opposed to the charity only receiving part of the IRA money. Again, that fund 5% and your kids getting the rest, to which they will have to recognize as ordinary income over 10 years, subject to their tax rates.

The bottom line is that in this case I just mentioned, there will be taxes paid, meaning your beneficiaries get less and the government gets more, versus giving the otherwise taxable retirement account to the charity free of tax. When you name the charity directly as a beneficiary on the pre-tax retirement account, the money will go directly to the charity, avoiding both the time and the expense of probate. So you don't really need to worry about that there.

Additionally, the distribution to the charity will not be considered income to your estate as the IRA owner if it makes sense in your situation. This strategy may also save estate administration costs for your beneficiaries since it's less complicated and would likely require less work by the attorneys during the administration of your estate because they don't need to add up the whole value and look at the different assets and the taxation of the different assets and say okay, we need to sell off 5% of this to make sure the charity gets it. No, you'll just have a retirement account with them listed as a beneficiary or partial beneficiary, and the money can just get sent right to them. It's pretty straightforward.

Okay, really quick, we've been talking about pre-tax retirement accounts only like 401(k)s and IRAs, traditional IRAs. But what about Roth IRAs? Well, it's plain and simple. Roth IRAs are just downright a better asset to leave to a trust if post-death control is needed.

[00:32:04]
So, Roths can be a partial solution to these potential trust tax issues when you need that control via a trust. More specifically, we can use things like Roth conversions over time to potentially avoid some of those high trust taxes for your heirs if a trust is going to be the beneficiary.

Why is this? Because post-death distributions to the trust from the Roth are tax-free. However, after the SECURE Act, most but not all trusts will be subject to that 10-year payout rule after death. However, the inherited Roth funds paid out to the trust can be held and protected in the trust even after the 10 years. So, in other words, if a Roth is inherited by the trust because the trust was named as the beneficiary on the Roth account, the Roth money can sit there and continue to grow tax-free in the Roth for the next 10 years, even though the Roth is held by that trust. And then once distributed in year 10, the money can be distributed out of the Roth but still stay in the trust rather than being paid directly to the beneficiaries. Meaning that that post death control, that language in your trust can keep going.

It's pretty awesome. That's exactly what most people intend. And this is opposed to money being paid out to the trust from a pre-tax IRA and therefore being subject to those really high trust tax rates simply because we have more sophisticated protection needs over that money for our beneficiaries. It's like a penalty for trying to do the right thing and keep heirs from squandering money and or making bad decisions, or protecting public benefits. If I want to do that, I have to pay more in taxes. Yeah, go figure.

[00:34:01]
To sum this up, it makes the most sense to name a trust as a beneficiary of your retirement accounts if you have strong, non-tax-related and personal reasons for retaining some of that control from the grave. However, this is also why you would leave any property in a trust, not just retirement money. You may choose to do this if you feel the need to protect the money for your beneficiaries as well as from your beneficiaries. Kind of weird to think about it that way, but it's true. Prior to the SECURE Act and the SECURE Act 2.0, people would use trusts as beneficiaries primarily to simplify beneficiary designations across all of their accounts. And they wanted to be able to stretch those required minimum distributions over their beneficiaries life expectancies in order to minimize the tax hit and to keep some control over how the money is spent by the heirs.

However, as you now know, most trust beneficiaries will now be subject to that 10-year rule, and any language in your trust that provides control can come at a very expensive price tag if not structured properly. And that's due to the higher tax rates for estates and trusts. So don't name a trust as the beneficiary of your retirement account unless you know exactly what you're doing and are certain it's the only solution for your end goal. This is not do-it-yourself territory. Therefore, that means if this is going to be done right and a trust is absolutely needed as the beneficiary, it's likely going to cost you quite a bit to set it up. However, that expense may be a grain of sand compared to what could be saved for your heirs in the future.

So, one potential solution to avoid the costs and complexities is to consider Rothifying your retirement assets. Meaning you can consider converting some of this pre-tax money to Roth over time.

[00:35:59]
I want you to note that Roth conversions still may not make sense given your situation, as there are many complexities to make the decision to convert, other than just these estate planning nuances, so always consult a competent professional first.

And lastly, review your beneficiaries on all of your accounts to be sure that your estate plan is up to date, and do it regularly. In addition, be sure to review your trust documents with your attorney and double-check to see if amendments are required. Right? You might have the need to keep the trust as your IRA beneficiary, but if the trust was created a decade ago, then you likely need some updates in there. You might also get with a financial advisor to run a hypothetical scenario that can show you what your beneficiaries would each receive, net of taxes, the way you have your estate plan set up currently. You may be shocked to find that things are imbalanced and not what you originally intended. You might have one beneficiary that's got a completely different lifestyle and tax situation than a different beneficiary, and you think you're leaving them the same amount of money, but after each of them has to pay taxes, it's completely lopsided. So that's the kind of stuff we need to be looking for here in order to make sure that things happen according to your intentions.

And that is a wrap on this week's episode. If you haven't already, subscribe to and follow the show on your podcast app. That way, you can get notified each time we drop a new episode every two weeks. If you want a second opinion on the structure of your estate plan or you want to dive deeper on tax planning for your specific situation, visit our website@planablewealth.com and schedule a discovery call for a free Tax Optimized Retirement Playbook.

Also, be sure to check out our free monthly newsletter to get more useful information on retirement planning, investments, and taxes once a month straight to your inbox. Our newsletter often dives deeper into some of the topics we talk about on the show, as well as useful guides and charts available for download.

[00:38:03]
As always, you can find the links to the resources we have provided in the episode description below, right there on your podcast app, or you can head over to retiredishpodcast.com/76. Thanks again for tuning in and following along. See you next time on Retired-ish.

[00:38:18] Disclosures
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

Cameron Valadez is a registered representative with, and securities and advisory services are offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.

Neither LPL Financial nor its registered representatives offer tax or legal advice. Always consult a qualified tax advisor for information as to how taxes may affect your particular situation.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply. Distributions from earnings are not subject to the 10% penalty if you qualify for an IRS exception — please consult with your tax advisor for details.

Distributions from a conversion amount must satisfy a five-year investment period to avoid the 10% penalty. This pertains only to the conversion amount that was treated as income for tax purposes.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA.

In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Tax and accounting-related services offered through Plan-It Business Services DBA Planable Wealth. Plan-It Business Services is a separate legal entity and not affiliated with LPL Financial. LPL Financial does not offer tax advice or tax and accounting-related services.