There’s more than retirement savings power in a Roth IRA. Used properly, it can help cut your beneficiary’s tax liability, regardless of if and when tax reform becomes reality.
If you’re interested in reducing the taxes your heirs will have to pay, you’re probably concerned about the discussion about tax reform going on in Washington these days. Unfortunately, there’s no way to be certain what, if any, changes will actually occur. In the meantime, your estate planning attorney can help you structure your estate, so that less of it ends up being consumed by taxes. That includes moving funds into non-taxable accounts, including Roth IRAs.
Motley Fool’s recent article, “A Clever Way to Cut Your Heirs' Income Taxes,” says the money you put into a Roth retirement savings account has already been taxed. It was taxed on the contributions you made or as a rollover from a tax-deferred retirement savings account. As a result, everything in that account is now non-taxable for income-tax purposes. As the Roth has been open for at least five years prior to your death, the money in that account won’t be subject to federal income taxes.