Financial Abundance Guide

Did you know that Roth IRAs are a great Estate Planning tool?

Most people know that contributions to a Roth IRA can grow tax free and provide tax-free withdrawals. This tax free growth can often provide better after-tax returns than a traditional IRA, depending upon your present tax bracket and what your tax bracket will be when you turn 70 ½.

You may not be aware of all of the following additional differences between a Roth IRA and a traditional IRA:

1. If you file income taxes jointly and you and/or your spouse are covered by a company retirement plan, you and your spouse can each contribute $4,000 ($5,000 if you are over 50) to a Roth IRA, as long as your Adjusted Gross Income (AGI) is under $156,000 ($99,000 if you are single).
2. As long as you have earned income and your AGI is under the maximum amounts allowed, you may contribute to a Roth IRA, regardless of how old you are.
3. You are never required to take distributions from a Roth IRA.
4. When you die, your Roth IRA beneficiary may roll over your Roth IRA into an inherited Roth IRA. The beneficiary will be required to take annual distributions based on their life expectancy, with the remaining assets growing tax free for as long as they live.
5. In 2010, Adjusted Gross Income restrictions on converting IRAs to Roth IRAs are eliminated. While you pay taxes on the converted amounts, if you pass your Roth IRA assets to a younger heir, the total tax savings could very significant.

If you are in a position to pass some of your assets to your children or grandchildren, passing Roth IRA assets can provide many years of tax free income and growth to your beneficiary. Be sure to discuss this approach with your Estate Planning attorney.