If farmer Cecil wanted to leave a million dollars in a trust ,
For the sole purpose of helping the teachers out at the elementary school.

He was hoping to pay in to Roth I.R.A's
For their retirement .

( They show trust their wage stub and the trust sends the IRA account the appropriate payment )

Is anyone going to have a problem wit that ?

This message has been edited. Last edited by: bendable,

If they contributed to a 403B or 401K that year I do not think the Roth would be allowed.

Even if it is legal which I doubt, it isn't administratively feasible, meaning at its simplest that a corporate trustee won't take it and a personal trustee, if you can find one, is going to spend a bunch of money in legal fees over whether distributions are legal because all of your beneficiaries are going to have unique circumstances.

Instead, have the trustor set up the trust naming any retired teacher from the appropriate school, with proper documentation of course, as a beneficiary for whatever amount the farmer has set.

there would appear to be nothing wrong with the trust in its basics. The purpose is legal, it seems, just distributing to people that met a standard you set.

And of course hire competent counsel to draft the thing and make sure it works in your state.


this isn't a perfect explanation but its three paragraphs of, yeah I see problems with it.

Forgo the trust and set up a 501C3 with the mission of supporting those teachers. Farmer remains trustee of the principal and distributes gain and/or principal based on 501’s mission criteria.

Just because he wants to fund a Roth doesn’t mean the recipient has to keep it as a Roth. Further, this may be subject to gift tax, and as stated above, teachers being government employees probably have a pension, already, and additional “retirement” contributions may impact or be impacted, detrimentally, by farmer’s good intentions.

Better yet, GET A TAX ATTORNEY.

I thought it sounded like a logistical nightmare.

He's 82 y.o.,
So his grandkid would have to act as trustee.

The school has 29 teachers, thanks for the recommendations.

He wants to make sure that the teachers stay around for many years to come.

quote:

GET A TAX ATTORNEY

^^^^^ THIS!!

Anyone may fund a ROTH with gifted money as long as there was earned money of the same amount (after taxes).

It would be easier to establish an annual gift to the recipients administered by a trustee until the funds are depleted.

quote:

Originally posted by 229DAK:

quote:

GET A TAX ATTORNEY

^^^^^ THIS!!

With respect, he doesn't need a tax attorney he needs a trust attorney. different kind of thinking involved.

This is my area of expertise.

No is the easy answer.

Logistically, the trust could be established to gift money to the teachers and the teachers would then be able to contribute to their own IRA. Unfortunately, there is no way he can force them to use the funds for the IRA or even that they leave the funds in the IRA if they did contribute. Most IRA administrators will not accept third party contributions.

Keep in mind that not everyone is eligible for a Roth IRA. Just because they are a teacher does not mean their income is low enough. My wife is a teacher and is not eligible for a Roth IRA contribution. Everyone with earned income is eligible to make a Traditional IRA contribution but some are not able to make a tax deferred contribution.

He has a noble goal, in practice, he might be better served to provide a cash "match" the annual contribution a teacher makes to their 403b plan up to an annual maximum. The trustee could require the teacher to show their last pay stub each year to prove the level of contribution. Once the contributions were confirmed, the trust would gift the teacher a sum of money. Limits for 2020 are $19,500 and $26,000 if over 50. The trust could cap the amount it would match at any number they wish.

This needs to be a very detailed Trust and the Trustee would have quite a bit of record keeping to ensure the trust requirements are met. I highly recommend a Corporate Trustee instead of a family member. I also recommend a very good trust attorney...

Good Luck.

Grateful for your time, thank you.


He is under the impression that as much as 25% of the funds that he leaves might be eaten up by the lawyers and trustees.

But your way sounds much better.

"I highly recommend a Corporate Trustee instead of a family member. I also recommend a very good trust attorney..."

Absolutely agree