Passing on a Roth IRA remainder amount to your loved ones may be a goal as part of your estate planning. It’s also important to think about how your Roth IRA fits into your own drawdown strategy. One of the easiest ways to avoid taxes on retirement funds is to use a Roth IRA. You may also with to gift your Roth funds to a beneficiary in the future, too, as part of your estate plan.
Both 401(k) plans and IRA plans can be structured as Roth accounts, and these don’t offer a tax deduction on contributions but will allow you to take out tax free withdrawals after age 59 and a half. The reason for this is because of how a Roth account is structured. You pay taxes upfront at the time that you contribute rather than owing money on your distributions.
You may not be able to use a Roth IRA if your income exceeds certain levels, such as $214,000 for joint filers or $144,000 for singles. You may still be able to convert your traditional plan to a Roth at any time. Because you’ll have to pay income taxes on the amount of the conversion, this is very similar to as if you just withdrew the money. It’s very important to make sure that you have your beneficiary forms filed properly with your Roth IRA holder.
This is because you want to ensure that these assets pass on to the loved ones that you want when you pass away.
If you have questions about structuring a Roth IRA as part of your estate planning strategy, or other related questions about your overall estate plan, set aside a time to meet with a qualified attorney in Pasadena now.