Many may not consider the possibilities that a Roth IRA can offer in an estate plan. But, there are three benefits that a Roth IRA can offer if the value of your estate is less than the applicable exclusion amount ($ 1.5 million in 2005 and $ 2 million in 2006s. and 2007) and if one of your planning goals is to leave that much money. as possible to your heirs.
Definition of Roth IRA
Simply put, the Roth IRA is an IRA that individuals contribute to after tax (contributions to a traditional IRA can be made with pre-tax money). When qualifying withdrawals are made1, they are completely exempt from federal income tax (state tax treatment may vary depending on your state of residence).
Benefits of estate planning for a Roth IRA
There are three.
1.) Spend tax-free money to an heir. The benefits of estate planning begin with the Roth IRA's ability to pass money to a beneficiary tax-free on eligible distributions upon your death, provided the Roth IRA meets a period of five-year detention.
2.) The Roth IRA avoids forced exhaustion in old age. Due to the minimum distribution requirements (forced distributions at age 70 and a half), many traditional IRAs can be significantly depleted if their owners live in their late 80s or beyond. Since a Roth IRA does not face any such requirement, it can continue to benefit from a tax deferral each year with no obligation to receive distributions.
3.) Contributions can continue at any age. Provided the eligibility conditions are met and you have compensation (as defined by the Internal Revenue Code).
With the Roth IRA, you may have the opportunity to save more money for your heirs than with a traditional IRA, especially if you are living long. Remember that IRA money, including money in a Roth IRA, passed on to heirs will be included in your gross estate for federal estate tax purposes. .
Meet with your tax advisor and financial professional to discuss your personal situation and how a Roth IRA strategy can help you achieve your goals.
1 Tax-free Roth IRA income withdrawals allowed five years after the first contribution account is created. Once the five-year requirement is met, distributions will be exempt from federal income tax if withdrawn: (1) after age 59 1/2 (2) due to disability or death or (3) to pay up to $ 10,000 in first-time home purchase expenses. Withdrawals of income made earlier than five years after the first contribution to the account creating the account for purposes not mentioned above, will be subject to an IRS penalty of 10% and taxed at regular tax rates.
The information in this document is not intended (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of Roth IRAs. You should seek advice based on your particular situation from an independent tax advisor.
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This article is courtesy of Cristina Callegari. Cristina is a Registered Representative who offers securities through brokers / brokers affiliated with MetLife, including Metropolitan Life Insurance Company (NASD Member) or MetLife Securities, Inc. (NASD / SIPC Member). Insurance and annuities offered by the Metropolitan Life Insurance Company. (He / She) is focused on meeting the individual insurance and financial services needs of people in the New York metropolitan area. You can reach Cristina at the Metropolis Financial Group office, 1979 Marcus Avenue, Suite 234, Lake Success, NY 11040, 516-326-7041.