Many may not consider the possibilities that a Roth IRA can offer a succession plan. However, a Roth IRA can provide three benefits if the value of your estate is less than the applicable exclusion amount ($ 1.5 million in 2005 and $ 2 million in 2006 and 2007) and if any of your objectives Planning is to leave as much money as possible to your heirs.
Define the Roth IRA
In simple terms, the Roth IRA is an IRA to which individuals pay after-tax contributions (contributions to a traditional IRA can be made with pre-tax money). When eligible withdrawals are made1, they are totally exempt from federal income tax (the tax treatment of states may vary depending on your country of residence).
Benefits of estate planning from a Roth IRA
There are three.
1.) Pass tax-free money to an heir. The benefits of estate planning begin with the Roth IRA&39;s ability to transfer money to a beneficiary, free of income, without earning tax on distributions paid upon your death, provided the Roth IRA fulfills a holding period of five years.
2.) The Roth IRA avoids forced exhaustion at an advanced age. Due to minimum distribution requirements (forced distributions at 70 ½ years), many traditional IRAs can be significantly depleted if their owners live in the late 1980s or beyond. To the extent that a Roth IRA is not subject to such requirements, it can continue to benefit from a tax deferral each year without any obligation to take distributions.
3.) Contributions may continue at any age. If the eligibility conditions are met and you have an indemnity (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 not forget that the money the IRA, including the money from a Roth IRA, passed on to the heirs will be included in your estate for the purpose of l &39;. federal estate tax.
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 Withdraw the Roth IRA tax-free income five years after the creation of the first account. Once the five-year condition is met, distributions will be exempt from federal income tax if taken: (1) after 59 1/2 (2) years due to disability or death or (3) to pay up to $ 10,000 in fees to buy a first home. Withdrawals of winnings made less than five years after the first contribution of the account creating account for purposes not mentioned above will be subject to a 10% penalty from the IRS and will be taxed at the tax rates. ordinary.
The information in this document is not intended for (and can not be used by) anyone to avoid IRS penalties. This document supports the promotion and commercialization of Roth IRAs. You should seek the advice of your independent tax advisor according to your particular situation.
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This article is courtesy of Cristina Callegari. Cristina is a registered representative offering securities through MetLife affiliated brokers, 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] focuses on meeting the individual insurance and financial services needs of citizens of the Greater New York Metropolitan Area. You can contact Cristina at the Metropolis Financial Group office, 1979, Marcus Avenue, Suite 234, Lake Success, NY 11040, 516-326-7041.