Gerber and Co., CPAs and Financial Advisors

Roth individual retirement accounts (IRAs) are typically thought of as retirement planning tools. However, if you don't need the entire balance during your lifetime, a Roth IRA offers estate planning advantages not available with a traditional IRA. Those advantages relate primarily to the following features:

The account owner does not have to take withdrawals after age 70 1/2. With a traditional IRA,
minimum required distributions are required after the age of 70 1/2 based on the life expectancy of the account owner. With a Roth IRA, you can leave the funds in the Roth IRA to continue accumulating on a tax-free basis.

Withdrawals made by heirs are received income-tax free.
With both Roth and traditional IRAs, the IRA's value at the date of your death is included in your taxable estate and may be subject to estate taxes. However, the income tax treatment is substantially different. Withdrawals from traditional IRAs are subject to ordinary income taxes, while withdrawals from Roth IRAs can be taken income-tax free. If heirs elect to take withdrawals over their life expectancy, the funds in the Roth IRA will continue to grow on a tax-free basis and withdrawals will be free of income taxes. Heirs must start taking withdrawals by Dec. 31 of the year following your death to take withdrawals over their life expectancy. If they don't, the entire account must be cashed out by the end of the fifth year following your death.