Can I gift my Roth IRA to a grandchild?

Can I gift my entire Roth IRA account to a grandchild and roll all of the tax-free accumulation over to them? Or would I have to physically make qualifying and/or basis withdrawals and set up a new Roth account in my grandchild's name?

IRAs, Taxes
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April 2017
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You can't just hand over your Roth IRA to a grandchild while you are alive. However, there are a couple of things you can do which might be almost as effective.

You can designate your grandchild as the beneficiary of your Roth IRA. At the time of your death, the assets pass to him/her without triggering any income tax. The grandchild will need to take minimum distributions each year. The required amount will be a function of their age and life expectancy. Presumably, your grandchild will be quite young so the required distributions should be very small. Of course, they need not pay income tax on these withdrawals.

There are some issues to consider. Your grandchild does take control of the money when he reaches the age of majority. That's either 18 or 21, depending on the state. They can buy a boat or rather "stretch" the distributions over their lifetime. This is maybe not a big deal if the IRA is of moderate size. For larger amounts, you might want to name a trust as beneficiary with the intent of regulating your grandchild's access to funds.

You can also fund your grandchild's own Roth IRA while you are alive, to the extent that they have earned income. If the individual has not reached the age of majority, the recipient Roth IRA will have to be a custodial account. Otherwise, they will have to open the Roth IRA themselves to receive your gift. You can withdraw money from your own Roth IRA or use other resources to make gifts to your grandchild up to the amount they are allowed to contribute for a given year. If your 16 year old grandchild earns $2,500, you can gift them that amount and perhaps coordinate with the child's parents to insure that the money makes it into the Roth IRA.

April 2017
April 2017
April 2017
April 2017