You probably already know how valuable a self-directed IRA can be to help you meet your long-term retirement goals. With its wide range of investment options, an IRA with a self-directed custodian such as Quest Trust Company can let you execute a wide range of investment strategies.
But are you aware that you can also use a self-directed IRA to help you meet your estate planning goals? And did you know that a Roth self-directed IRA has certain advantages in this regard compared to a traditional self-directed IRA? Let’s take a closer look at how you can use a Roth self-directed IRA to meet your unique estate planning goals.
The primary way of using a self-directed IRA to accomplish estate planning goals is through the use of account beneficiaries. As with your other investments and assets, you can name primary and contingent beneficiaries of your self-directed IRA, and do so either with respect to individual assets within your account, or as a percentage of account value.
This can be a great way to make sure that specific individuals receive specific assets in the event of your passing. For example, if you hold real estate in your self-directed IRA (which you wouldn’t be able to do in an IRA held with a custodian such as a discount broker or your local bank), you can name a particular family member or other beneficiary that you want to receive that asset in the event of your passing.
And if you choose for your spouse to be your account beneficiary, they’ll have certain tax advantages in how they can choose to receive your account, and in this way you can lessen the tax burden of your passing.
A Roth self-directed IRA is not subject to the rules on required minimum distributions. These rules, which apply to traditional self-directed IRAs, dictate that once you reach age 70 1/2, you must begin taking minimum distributions from your account every year. The principle behind these rules is to balance the tax-deferred growth of a traditional self-directed IRA with the need of the federal government to eventually be able to receive the taxes they’re owed.