There are many different estate planning tools and strategies available to you. Working with a qualified estate planning lawyer is one of the best ways to review all assets inside your estate plan, as well as those that may pass outside of traditional probate. One such estate planning asset is a Roth IRA. This does not just have to be used as your own individual retirement plan.
It can also be used as a way to transfer assets to the next generation. Assets contributed to a Roth IRA are taxed, which means that distributions from the account are tax free. If you don’t end up needing the money for retirement, you may allow all of the money in the IRA to grow tax free to be passed on to your heirs.
If your spouse is the beneficiary in your Roth IRA, your spouse can become the owner of the account when you pass away. They can roll it into a new IRA or put the IRA in their name, and it will be treated by the IRS as if your spouse had always owned it. Your spouse is not required to take any distributions from the IRA if they do not meet the age requirements to do so.
The rules for grandchildren and children, however, are different for inheriting IRAs. These individuals must withdraw all assets inside the inherited account in no less than in no longer than 10 years after they inherited. Other non-spouse beneficiaries may be treated as spouses, such as chronically ill individuals, minor children and people who are not more than 10 years younger than the account owner. To make sure you have appropriately planned for all Roth IRA issues in your state plan, contact a lawyer in Pasadena, CA to discuss your options.