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Q-and-A With Jonathan Pond

Roth IRAs and Your Heirs

Q: I know about the advantages of Roth IRAs during retirement, but I’ve heard that my heirs may benefit as well if they inherit a Roth IRA. – Barbara, Delaware

A: Roth IRAs can be advantageous to your estate planning both during your lifetime and after the Roth IRA is inherited.

Since you don’t have to make minimum required distributions from a Roth, if you can afford to leave all or most of the money intact, you will be able to pass a lot more to your heirs compared with a traditional IRA where minimum distributions are required.

Your heirs will not have to pay income taxes when they withdraw money from an inherited Roth IRA.  If they inherit a traditional IRA, taxes would be due on each withdrawal.  While annual withdrawals must be made from all inherited IRAs, if the heirs can afford to withdraw only the minimum, the Roth IRA can be stretched out for decades while continuing to enjoy tax-free growth.  So while Roth IRAs can be very advantageous for retirees, they can be equally beneficial as an estate planning strategy. 

All the information presented on AARP.org is for educational and resource purposes only. We suggest that you consult with your financial or tax adviser with regard to your individual situation. Use of the information contained in this website is at the sole choice and risk of the reader.

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