Using A Roth IRA to Avoid Probate
Aug 01, 2010 / By: Bradley B. Anderson, Estate Planning Attorney / Category: Financial Planning, probateWith a Roth IRA, your contributions (and the interest they earn) can be withdrawn tax-free. While this tax benefit may be the most significant aspect of a Roth IRA, it offers a few more perks as well.
For starters, the Roth IRA is a contact that directs the payment of the balance of the account at your death to your designated benefivciary. So any funds that remain in the account when you die can be passed to your designated beneficiary without probate. But unlike other retirement plans, the Roth IRA doesn’t require you to begin withdrawing money at age 70 ½.
With a traditional IRA, for example, you must make minimum withdrawals beginning at age 70 ½. This amount will vary depending upon your age and the age of your designated beneficiary. The reason for this requirement is to ensure that you – not your beneficiary – receives the bulk of the funds in your IRA before you pass on.
A Roth IRA, however, doesn’t require you to withdraw any funds. So, unless you need the money, you can just leave it in the Roth IRA where it will continue to grow. Upon your death, all the funds will pass to your beneficiary, income tax-free.
To learn more about ways to avoid probate, call us today.
Anderson, Dorn & Rader, Ltd is a member of the American Academy of Estate Planning Attorneys.
