1 Simple Move to Reduce Your Heir’s Taxes

When building your estate plan, you want to leave the most money you can to your heirs. But you also want to ensure they are not heavily taxed when they receive your assets. One way to reduce your heir’s taxes when they receive your benefits is to move your traditional IRA accounts to Roth accounts.

Difference Between a Traditional IRA and a Roth IRA

You may have started with a Traditional Individual Retirement Account (IRA). In fact, some businesses are now offering estate planning as a benefit to help their employees plan for their retirement. But now may be the time to roll it over to a Roth IRA.

The main difference is when taxes are paid on the account:

• Traditional IRA – you contribute pre-tax dollars to the plan. When your beneficiaries wish to draw money out of the account, they will have to pay taxes on the amount.
• Roth IRA – you contribute after-tax dollars to the plan. You have already paid the taxes, and your beneficiary will not have to do so.

Benefits of Leaving Your Heirs a Roth IRA

One reason for an estate plan is to make things easier on your loved ones left behind. You never want to burden them with red tape and excessive amounts of taxes. Converting your Traditional IRA to a Roth IRA has several benefits for your heirs.

• They can make tax-free withdrawals.
• They can stretch the withdrawal time limit from 10 years to over their lifetime.
• A Roth IRA does not go through probate. Instead, the balance will go directly to them.

When working through your estate plan, it could benefit your heirs to roll your Traditional IRA into a Roth IRA. One way to reduce your heir’s taxes is through a Roth IRA.

An Estate Planning Attorney Can Help Reduce Your Heir’s Taxes

Having a well-developed estate plan will make the legal process after your death just a little easier. Consider moving your IRA into a Roth account when you are ready to leave some of this money to your heirs. An experienced estate planning attorney will review your will, retirement plans and health care directives to ensure they all work together, and identify other ways to protect the future of your loved ones.

Oak Brook Estate Planning Attorney

An experienced estate planning lawyer can advise you on the best options to help your heirs receive your retirement amounts. To talk to a qualified attorney in Chicago, contact the Estate & Probate Legal Group at 630-864-5835. 

We serve Cook, DuPage, Kane, Lake and Will counties.