How You Can Use Roth IRAs to Avoid Probate

How You Can Use Roth IRAs to Avoid Probate

If you’re beginning to think about retirement, consider setting up a Roth Individual Retirement Account (IRA). Not only are IRAs very tax-friendly savings plans, but they also have long-term benefits that allow you to leave money for your heirs without forcing them to go through a challenging probate process.

One misconception people have about setting up a Roth IRA is that it is not tax friendly. This is because unlike IRAs and 401(k) plans, Roth IRA contributions are not tax deductible. The difference, however, is that once you are ready to withdraw money from the account, your distributions are not taxed. In general, this rule only applies if your account has been operational for five years or more and you are at least 59-and-a-half years old.

Roth IRAs also provide an easy way for your loved ones to avoid probate litigation after your death. Under traditional estate law, your estate would pass into probate upon your death, where a probate court would oversee the distribution process. This can be costly and time-consuming, and heirs are often anxious to avoid it if possible. Roth IRAs are a great way to pass large sums of money to heirs without having to deal with this complex process.

Once you have established a Roth IRA, it can keep accumulating tax-free income for as long as you like, all the way up until your death. At that point, the account will pass to whomever has been named as its beneficiary. If you name more than one person, the account will be split equally between the beneficiaries.

If you are interested in creating a Roth IRA, contact a Florida estate planning attorney at BaumannKangas Estate Law. for assistance with setting it up.