Three Advantages a Roth IRA May Offer Your Estate Plan

By: Cristina Callegari
Submitted: 2007-01-17 16:15:24
Print this article | Tell a friend | For publisher | Social Bookmarking
Rating:
 

Many may not consider the possibilities that a Roth IRA can offer an estate plan. But, there are three advantages that a Roth IRA can offer if your estate value is under the Applicable Exclusion Amount ($1.5 million in 2005, and $2 million in years 2006 & 2007) and if one of your planning goals is to leave as much money as possible to your heirs.

Defining The Roth IRA

Simply stated, the Roth IRA is an IRA that individuals make contributions to on an after tax basis (contributions to a traditional IRA may be made with pre-tax money). When qualified withdrawals are taken1, they are totally free from federal income tax (state income tax treatment may vary depending upon your state of residence).

Estate Planing Benefits of a Roth IRA

There are three.

1.) Passing income tax-free money to an heir. The estate planning benefits begin with the Roth IRA’s ability to pass money to a beneficiary income tax-free on qualified distributions at your death, provided the Roth IRA satisfies a five-year holding period.

2.) The Roth IRA avoids forced depletion at old age. Due to minimum distribution requirements (forced distributions at age 70 ?), many traditional IRAs may be substantially depleted if their owners live into their late 80s or beyond. Since a Roth IRA faces no such requirements, it can continue to benefit from tax deferral each year with no requirement to take distributions.

3.) Contributions may continue through any age. Provided eligibility requirements are met and that 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 live a long time. Do remember that IRA money, including money in a Roth IRA, passed 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 may help you to meet your goals.

1Tax-Free Roth IRA withdrawals of earnings permitted five years after first contribution creating account. Once the five year requirement is met, distributions will be free from federal income taxes if taken: (1) after age 59 1/2 (2) on account of disability or death or (3) to pay up to $10,000 of the expenses of purchasing a first home. Withdrawals of earnings made earlier than five years after the first account contribution creating the account for purposes not aforementioned, will be subject to a 10% IRS penalty and taxed at ordinary income tax rates.

The information contained in this document is not intended to (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 circumstances from an independent tax advisor.

L0201B5BK(exp1207)ENT-LD

This article appears courtesy of Cristina Callegari. Cristina is a Registered Representative offering securities through MetLife affiliated broker/dealers including Metropolitan Life Insurance Company (member NASD) or MetLife Securities, Inc. (member NASD/SIPC). Insurance and annuities offered through Metropolitan Life Insurance Company.[He/She] focuses on meeting the individual insurance and financial services needs of people from the New York metropolitan area. You can reach Cristina at the office at Metropolis Financial Group, 1979 Marcus Avenue, Suite 234, Lake Success, NY 11040, 516-326-7041.

Article source: Expert Articles

Most Recent Articles in Estate Plan Trusts category

  • Choosing Guardians for Children - By: Jamie Kahn
    The most important decision you'll make in your estate plan is appointing guardians for your minor children. Who you pick will impact not only your children but also the lives of your guardians. While you and your children may feel an affinity for a particular adult(s), that relationship could be strained in a 24-hour-a-day, 7-day-a-week environment.
  • How To Protect Your Retirement Savings For Your Golden Years - By: Gregg Hall
    Retirement is a glorious time every working individual looks forward to. It is a time of freedom, rest, and relaxation. It is also a time to do what you did not have time or resources to do when you were working.
  • Some Simple Strategies For Protecting Your Assets - By: Gregg Hall
    As elementary as it may sound, no matter how much money you make, you still need to find ways to hold onto it. There are many small steps to take that will add up to big savings in the end. If you value the assets you have accumulated, or if you feel you should be accumulating more, take this advice and make some minor changes.
  • Reverse Mortgage Supplemental Retirement Financing Strategy - By: Jon Hansen
    A reverse mortgage is a loan for senior citizens. It is often used to cover medical expenses, and is becoming a common way for retired persons to supplement their existing monthly retirement income.This is a loan that senior home owners may take against their current home.
  • Understanding The Benefits Of Forming Trusts - By: Alexander Gordon
    What is a Trust And Who Are The Settlor, Trustee And Beneficiaries?A trust is an institute of a special type of structure capable of holding title of the property-providing benefits to one or more people. It is a lawful relationship between the two people, the settlor and the trustee.
  • Trust Deeds – Breath A Debt Free Life at Easy Terms - By: Linda R Davis
    Trust deeds are considered as a convenient settlement of debts a debtor is no more able to pay off. The trust deeds are a method used in Scotland for easy clearance of debts. Usually elsewhere for lessening and time bound pay off of debts, debt management program is sought by the debt ridden person.
  • Ira Trusts: What's All The Hype About - By: Perry Fields
    A recent new development in estate planning is helping thousands of affluent people across the country with IRAs over 100,000 transcend estate tax and income tax. It keeps your beneficiaries from blowing all of the money you’ve worked so hard for.Its gives YOU the control over the conditions which must exist before your beneficiary can access the funds (other than the mandatory IRA distributions).
  • Enduring Power of Attorney Being Phased Out - By: Adrian Tatum
    In the UK the new mental capacity act is due to come into force on the first Monday in April 2007.The Act governs decision-making on behalf of adults who lack mental capacity, both where they lose capacity at some point in their lives, and where the incapacitating condition has been present since birth.This act covers all decisions, including personal welfare and financial matters, and covers decision-making on their behalf by attorneys, or court-appointed "deputies".
  • Probate and Estate Sales - By: Mika Hamilton
    “It's all about quality of life and finding a happy balance between work and friends and family.”-Philip GreenProbate and estate sales usually occur when someone wealthy dies. Estate sales have to be conducted because the decedent did not leave a will and everything is in his name.
  • Anguilla as a Offshore Jurisdiction - By: Gissela Martinez
    Anguilla is another jurisdiction with misleading bank secrecy. Commercial confidentiality is contained in the statues, BUT the government of Anguilla will co-operate fully with law enforcement agencies and regulators in other jurisdictions, think wholesale fishing expeditions and inquiries related to “possible” income tax violations. In other words records may be requested just to see if in fact there were any taxation violations that citizens of a certain country may have committed using Anguilla as a jurisdiction.