Many of us have heard the term “Roth IRA” and may even understand that it is a good way to avoid paying unnecessary taxes or avoiding probate. Needless to say, many out there believe that there is a lot to like about this estate-planning tool.
Some basics about the Roth IRA
This is a general overview, which an attorney can further refine to fit the needs of the client:
How are they different than a regular IRA?
Contributions to a Roth IRA are taxed going in, unlike a 401(k) or a Keogh IRA. Because the contributions to a Roth IRA are taxed, it makes it easier to eventually withdraw money, plus those that follow the guidelines will not be penalized. Moreover, all the accrued interest while in the account will not be taxed unless there are penalties. Moreover, most people earn their highest income after age 50, so that break for over 50 contributors can make for dramatic savings.
While a regular IRA can avoid probate, there are often additional guidelines the account holder must follow, such as requiring them to start withdrawing money by age 70 and a half. Roth IRAs, on the other hand, do not have withdrawal requirements. This enables the account to accrue a significant amount of money for the beneficiaries.
It is easy to use
Transferring that money to beneficiaries is also quite simple. The account holder need only ask for a beneficiary form from the account custodian and fill in the name of whomever they would like. Upon death, the beneficiary only needs a death certificate and valid ID to collect the money owed to them.
Smart estate planning often requires an attorney
The circumstances of an estate are as unique as the individuals and families involved. It is always wise to work with an attorney with experience handling Roth IRAs and other estate planning tools to get the maximum benefit.
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