In a legal system that offers plenty of ways for people to leave money to their heirs and family while avoiding probate, one lesser known method is of using a Roth IRA to avoid probate, report the researchers at FindLaw.
To be clear, according to Moneycrashers, "a Roth IRA provides tax free growth of your money in lieu of getting a tax deduction." It is available to people that make less than $105,000 and allows a maximum yearly contribution of $5000 (and $10,000 for married people). The contributions can be withdrawn at any time and are not tax deductible.
And given that it is a way to accumulate money over the course of one’s life, a Roth IRA is something that must be taken care of as part of your New York estate planning project.
In terms of avoiding probate, a Roth IRA is fairly straight forward.
Traditional retirement accounts can avoid probate by assigning a beneficiary for the account upon the death of the account holder, but often have additional requirements that minimize their usefulness when they are inherited.
Roth IRAs on the other hand, have no withdrawal requirements. This means that if you do not need to withdraw money from it, you can simply let the money grow, significantly increasing the amount of money that a beneficiary receives when the Roth IRA is inherited.
Finally, creating beneficiaries for your Roth IRA is quite easy. You may simply request a beneficiary form from the account custodian, and name whomever you want as beneficiaries of the account. The account does not need to be named in a will or trust; the beneficiary form itself takes care of that issue. Upon your death, the beneficiaries only need a copy of your death certificate and personal identification to claim the money in the account.
Along the way, if you have any questions about how to use a Roth IRA to avoid probate, then you should speak to a New York estate planning attorney.