The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Roth IRA Estate Planning||Date: 12/15/1998 9:23 AM|
|Author: TMFTaxes||Number: 7206 of 124826|
[[I've been looking for an answer to a simple question without any luck:]]
Are there really any "simple" tax questions?? Let's find out.
[[ Upon death of the Roth IRA
owner, does the money bypass estate taxes when transferring to the beneficiaries.]]
Nope. The value of the Roth IRA account will be included in the estate (same as a regular IRA). The difference is that the value of the Roth IRA can pass through to beneficiaries on a tax free basis (if done correctly).
This is different from a regular IRA. If you die with a regular IRA, that IRA is included in the estate, AND the beneficiaries are also taxed on the distribution of the IRA. So you are really paying taxes on the same money twice...once at the estate level and once at the beneficiary level.
So the Roth IRA is certainly a powerful estate planning tool...one that should not be overlooked in an overall estate plan.
[[ Since my mom doesn't need the money in her IRA, our overriding concern is estate planning.]]
As well it should be. But just because the Roth IRA will be included in Mom's gross estate may not necessarily override the decision NOT to convert.
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As always, thanks for your help.
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