Estate Planning With Your Roth IRA
Often times the focus of a Roth IRA is on the income tax benefits. There are also estate planning benefits with having a Roth IRA.
A Roth IRA lets you leave money to your heirs, without leaving them an income tax bill. When you take money out of a Roth IRA, your heirs will not have to worry about paying income tax on those withdrawals.
You are able to leave more money to your heirs. A Roth IRA lets your money keep growing until your death. You do not have to take distributions after you turn 70 ½, your money just continues to grow.
A Roth IRA allows you to continue to add money until the day you die. With a regular IRA, you can not make contributions after the age of 70 ½. All of the contributions made after age 70 ½ are tax free, not only for as long as you live, but also until your heirs take the money out.
A Roth IRA IS part of your estate. If your estate is big enough, you family could lose as much as 45% of the money in the Roth IRA to federal death taxes. They will not have to worry about paying taxes as well as estate taxes. All states have their own rules and may impose death taxes on a Roth IRA.
Congress makes the rules on who can put money into a Roth IRA and when you can take money out. The rules change often, so make sure you talk with your tax advisor about any estate planning done with your Roth IRA.