What happens to my Roth IRA when I pass away? - YouTube

Everybody wants to know what's going to happen to their stuff after they pass

away. So in this episode we're going to talk about what happens to that Roth IRA

post-mortem. Hey There! Welcome back to my channel. If you're like the average

American, you probably have different pockets of money that you have saved. You

might have your 401k with the employer, your Roth IRA that you set up one year

or two years and funded, or maybe you have a traditional IRA. All of these

things are treated differently when you pass away and so you want to make sure

that you have ducks in a row so that you know exactly where your money is going

and can direct it even after you pass. If you're new to this channel, welcome! My

name is Liz Hand. I'm a Certified Financial Planner and this is the

Happiness IRA a weekly vlog that helps you understand more about your

retirement money. So if you are new here consider subscribing and hitting the

bell icon so that you do not miss any new updates. So you've got a Roth IRA and

you're wondering what happens to it when you pass away. My first question to you

is: do you have a beneficiary listed? I recently did a video talking about what

happens to your traditional IRA when you pass away. And in there I talked about

the importance of having a beneficiary listed. Make sure you check out that

video here. And even more crucial is that beneficiary up to date? Because you don't

want to accidentally disinherit your spouse or accidently disinherit your

kids just because you haven't paid attention. When I talk about accidentally

disinheriting your spouse or your kids - what I mean by that is where someone was

not paying attention to the beneficiaries listed on their accounts

and once after they had a divorce they forgot to change the beneficiary to

their children. And what happens is all of that money went to their ex spouse.

Which typically people don't like to do. So all of that to say make sure that

your beneficiaries are up-to-date and accurate to what you want to happen with

that money. Okay, now that we have that checked off our list. What are the actual

options somebody has once they inherit your Roth IRA? Well first of all if they

are your spouse they have it pretty easy. They can just take on that Roth IRA as

if it was their own. There's no big changes that have to be made but they

should make sure that those beneficiaries get updated to their

preference. If your kids are the beneficiary of your Roth IRA, well they

have a couple of options available to them. First of all they can take

that Roth IRA lump sum. What I love about a Roth IRA is, if I am in my peak

earning years and I am inheriting a Roth IRA from my parents, all of that money is

tax-free. (reverse sound) tax-free because it's already been taxed in the past so the

lump sum can make some good sense for me. It's not gonna add to my taxable income

and I have some new cash in my pocket. So the second option for your kids is that

they can inherit that Roth IRA and stretch out the payments. So the IRS

doesn't want this Roth IRA hanging out for all eternity and passing on from

generation to generation to generation. They prefer taxable money, let's be honest. So

you have to get on a set schedule of payments over your lifetime. This might

be a good option for your children because they can really accumulate

wealth within that Roth IRA and it has a lot of tax perks. It's growing tax

deferred and when they end up taking out that money it's tax-free. So it's very

different from the traditional IRA. The final thing that could happen to your

Roth IRA when it passes from you to your children if they have inaction they are

not taking those distributions from the Roth IRA, technically they have to draw

it down within five years. So they can spread out the payments over that

five-year time period but they do need to draw it down if they have not

established a stretch Roth IRA distribution. Alright friends, that's all I

have for today. Thank you so much for tuning in, I appreciate it as always. So

that's what happens to your Roth IRA after you pass away and it goes to your

children or to your spouse. It's a pretty awesome tool for someone to inherit

because there are no big tax ramifications for them, they just have to

get on a set payment plan. If they're going to keep it long-term. This is just

another reason why I love Roth IRAs. If I can just step on that soapbox one more

time. But I am NOT a CPA and I am NOT an attorney so as we are talking about

these tax ramifications and also what happens at your passing make sure you're

also consulting with a CPA and an estate planning attorney for all of those

questions that you have. So with all of that good Roth IRA transfer information

I will leave you and you take care!