Why didn't you move the funds to a Roth IRA?  Taxes would have been the same, but the growth would have been tax free. Your logic is beyond strange, and your choices are equally as poor.

How does the bank distribute 20% of the principal each year without the trust terminating well before the "10 to 12 years" that you cite in your example? Sounds like the trust option worked.  At the least, it delayed full distribution into your sister's hands long enough for her to clean up her act. On the fees, ...more

Appointing a trust as a beneficiary is a smart way to go, regardless of the misinformation within this article. First, a trust will traditionally pay the income received from an IRA straight through to an income beneficiary while keeping the IRA within its tax deferred wrapper.  It's rare that a trust doesn't meet t...more