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Consider your IRA account as part of Estate Planning

Posted By on September 22, 2014

Among various estate plans, IRA account is becoming gradually popular option due to obvious reason – a huge income tax advantage – especially if it’s Roth IRA case, notwithstanding the Traditional IRA is also included. Another advantage is its simplicity of process and execution in the future by its nature. While the IRA owner is still alive, he/she can designate the beneficiary on the day the account was firs set up or after at any time.

This will eliminate the need for any legal document including formal will and detailed outline, trust paper that usually requires a second eye of preparation with expensive price tag. Once the IRA owner passes away, the beneficiaries will automatically inherit the account in their possession outside the probate or lengthy court’s order. Of course the tax advantage will be a continuing benefit to the heirs.

In case of Roth IRA, the entire account’s nest egg can be handed over to the beneficiary without any minimum distribution requirements. There is no such rule that beneficiary has to withdraw a portion of the money that he/she has inherited every year.

What’s better is that they actually can grow by contributing more money into that same account as long as they live. After all, these assets will grow with tax free scheme, therefore the biggest future benefits are unbeatable. Even with the traditional IRAs, the heir still can keep the inherited assets in a tax-deferred way until they actually retire.

So whether it is Roth or Traditional IRA, this is an excellent choice of handing over your valuable assets to your loved ones with maximum tax advantages. Also as an heir, you will have an option of either drawing all the money at once or leaving it there and take out gradually every year. This is the most efficient way of handling inherited assets unless there is a compelling reason that you have to take all the money immediately. Keep the money with already tax free status, and make the most out of it by keeping it and continuously adding more and growing further into the future.

When you consider your IRA account as part of estate planning options, get with your loved heir and discuss about wise investment and various withdrawal option, with minimum distributions each year.