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Tax consequences of liquidating a roth ira

A financial advisor or attorney can help sort this out, but be prepared for the expense and time it may take.

Estate planning, including a will or living trust, and a double-check of all IRA documentation, goes a long way toward making your death as easy as possible on those left behind. The information presented is for informational and educational purposes only.

With traditional IRAs, you pay income tax on withdrawals in the year you make them.

The tax rate on these withdrawals is based on your income tax bracket in the year you make the withdrawal.

Incomplete or ambiguous beneficiary forms can invite extra stress for those left behind.

If there is no designated beneficiary, the account might just go to the larger estate, where the five-year rule automatically applies.

But when you take a distribution from your IRA, 401(k) or another retirement savings plan, you must generally include it as taxable income.

The withdrawal may also be subject to an additional penalty tax of 10 or even 25 percent.

You can also meet the second requirement for up to ,000 if you're buying a first home.

If you meet only the first or the second criteria, or neither criteria, your distribution isn't qualified.

If you’re planning to leave an IRA in a trust, it’s best to bring in an attorney as part of estate planning in order to make sure beneficiaries can have the full use of the IRA as intended.

Don’t sign anything that’s confusing without expert help (and expert second opinion). If the entire estate of the decedent was subject to the estate tax, inheritors of an IRA will get an income tax deduction for the estate taxes already paid on the account. Even if we believe our departed loved one had the best intentions, it’s true that the beneficiary forms can be limiting.

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