If Roth Ira is funded by after tax money, should it not be excluded from my estate?

Question

and paid to my sole beneficiary tax free?

Answer 1

For income tax purposes, yes, but not for estate taxes purposes.

Estate taxes count everything you own regardless of whether they were paid with before tax dollars or after tax dollars.

Answer 2

There are always aspects to these questions--like how long the Roth IRA existed (was it at least 5.5 years?) etc. If you read this, it may answer your questions:

http://en.allexperts.com/q/Tax-Law-Questions-932/Taxes-IRA-inheritance-1.htm
"If the distributions come from a Roth IRA neither contributions nor earnings are taxable if it's a qualified distribution. The length of time he was retired makes no difference but if it's a Roth IRA the length of time he owned the IRA would make a difference in taxability of earnings." is part of the answer to a couple of questions that were asked. At the site you can see the woman says she's had 7 years work as a tax preparer at a national firm. What she said sounds right to me, but it would not hurt to assume there could be an issue not addressed here. Most likely someone where you have the IRA would know the answer.

Answer 3

Contributions to a Roth IRA are after tax, and there isn't any added tax (or penalty) on those (already taxed) contributions drawn at any time (which come out of a Roth first). advantageous factors are basically project to tax/penalty if drawn out too quickly, and are not taxed in case you have had a Roth IRA for a minimum of 5 years and are a minimum of age fifty 9.5. the prevalent concept is to p.c.. as much as you may right into a Roth IRA while youthful and tax fee is lowest. while eligible to your 401(ok) make contributions a minimum of sufficient to that to get any organisation experience and proceed to fund the Roth IRA. in case you have funds left over (or if bumping right into a much better tax bracket) bump up your 401(ok) contributions. Having a mixture of tax deferred [401(ok), IRA] and tax loose [Roth IRA or Roth 401(ok)] withdrawls provides you with greater flexibility in retirement, and with a bit of luck effect in much less tax than if each and every thing became tax deferred.

Answer 4

It is no different than if you cashed in the Roth IRA the day before you died and left the cash to the beneficiary.
However, there is no estate tax if the estate is less than $ 1 million. If it is substantially more than $ 1 million, you need to do some estate planning to minimize or avoid the estate tax.
A qualified professional would help. Some information is available by using Google or talking to a banker or broker, but they are not always correct in their assumptions, so you need to see an attorney, CPA or Financial Planner who is knowlegeable in that area. If you consulted me, I would tell you that I am not an expert and would recommend you get someone who is.

Answer 5

The estate tax is a tax on everything you owned on the day you die. It is not an income tax, so the fact that something is pre-tax or after-tax doesn't make a difference.

It includes your house, your stuff, your bank accounts, your IRAs even life insurance that you purchased so that your wife or children would get some money.

If you leave a traditional IRA to your child (pre-tax money), they get to pay the income taxes because you never did.

Answer 6

Yes, the value of your Roth IRA will be included in your estate. Income taxes and estate taxes are different animals.

And let me correct something a previous responder said that is dead wrong. Life insurance proceeds (in the US) are usually NOT taxable. http://www.irs.gov/faqs/faq4-9.html

Answer 7

Your entire estate, except for 401(k)s and conventional IRAs, is after-tax money. You are confusing income tax with estate tax.

Answer 8

No. You don't pay capital gains taxes on your home when its value increases (of course, you do pay property taxes though). Doesn't mean its a tax-free vehicle. The same is true with your Roth. You pay taxes on Capital Gains and Income from Interest and Dividends, when you collect on them. That is the only portion that is taxed (which is way cheap) as compared to the principal being taxed.
Since this is a long-term investment, the cap.gains is only 15%. If you retired with 2 Million in a traditional IRA, good luck trying to get in the 15% tax bracket.

Answer 9

no! nice try