Good morning ! My sister husband passed away and left her only ROTH IRA and IRA,but her husband financial advisor only mention to her the ROTH IRA not the IRA.but on Portfolio summary was saying he has both and also different account number.
Sorry for your loss. I hope everyone is doing OK.
There are differences with a Roth IRA and a Traditional IRA. The main difference between them is that with a Traditional IRA when money is distributed out of it, the amount taken out is considered taxable income in the year of the distribution and you must pay taxes on it. With a Roth IRA, funds taken out are tax free.
Your sister's husband could have had a Traditional IRA at some point and used the funds or he may have converted the funds from the Traditional IRA into the Roth. Either way, my suggestion to you is to have your sister contact the financial advisor and ask why the statements show an IRA with no balance. They should be able to explain to her what is going on with this.
I hope this helps
Good morning Liz. I am so sorry to hear about your loss. Good for you for being a comfort to your sister as she works through the estate. Yes, a Roth IRA and a traditional IRA are different, so here is a general overview. For a Roth IRA, you do not deduct contributions on your taxes, and the account grows tax-free. When funds are taken out, there are no taxes due. With a traditional IRA, you deduct contribution amounts on your taxes, and the account grows tax-deferred. When funds are taken out, you pay taxes on the amount withdrawn just as you would ordinary income.
If you sister is working with a financial advisor, and she has questions about the accounts, she should not be intimidated and she should ask and ask and ask until she understands and has a comfort level for her new situation. Changes to these accounts for estate purposes are tricky and she will need someone to walk her through the process. Financial advisors can be terrible about using lots of industry jargon, making it hard for us regular folk to understand, so she should always ask him to put it in layman's terms. Keep at it and good luck!
Liz, As everyone has correctly stated, it's important to find out exactly what IRAs were inherited and who is listed as the beneficiaries for each IRA. It is equally important for your sister to discuss how best to inherit her IRAs. In addition to whether she rolls the IRA into her own IRA or a beneficiary, if she is well off financially, she might also want to consider disclaiming one or both of the IRAs and allowing them to be passed to children or grandchildren, if any are named as contingent beneficiaries. Because children and grandchildren would be required to take smaller distributions (due to their age) than your sister from a beneficiary IRA, their inheriting an IRA would allow it to grow tax-deferred for longer and create greater wealth. it's also important to make sure the IRAs are transferred properly. Direct transfers are usually best, and are the ONLY way to transfer IRAs inherited by children and grandchildren. A non-spouse beneficiary can't do an IRA rollover. If a check is sent to your sister for an IRA rollover, make sure she does the rollover within 60 days. Otherwise, she would end up liquidating her inherited IRA. Inheriting IRAs is more complex than most people realize and it's easy to make costly mistakes and oversights. Work with a financial advisor who knows a lot about IRAs and how to inherit them properly and effectively.
You are correct. A Roth IRA is different from an IRA (also known as a Traditional IRA). They will each have their own account number, because they must both be reported to the IRS.
Each separate account will have its own beneficiary. It is possible that the financial advisor mentioning only one account was a simple oversight on his part (not a particularly forgiveable one, but possibly an oversight nonetheless).
It is also possible that your sister was the beneficiary on only one of the accounts, and another person is the beneficiary of the other account. If this is the case, then the financial advisor was correct in mentioning only the one account on which your sister is the beneficiary - because she would have no rights to any knowledge or information on the other account since she has no ownership interest in it.
There are multiple options for a spouse when it comes to inheriting an IRA or Roth IRA. She has the ability to disclaim (not accept) the IRA, but this is rarely the best option. She can "roll" the IRA into an IRA (or Roth IRA) of her own, in her own name, and essentially become the new owner of the account. Or, she can "roll" the IRA into a Beneficiary IRA and continue to be treated as the beneficiary of the IRA instead of the owner. This is known as the "Inherited IRA" or "Stretch IRA."
Which option she should choose is important because it determines at which point she must take distributions (withdrawals) from the IRA. She should consult in depth with the financial advisor (and possibly a tax advisor) before making a decision.
Jon Castle http://www.WealthGuards.com
You have indicated that your sister has inherited her husband’s IRA and Roth IRA. What she does now could have far-reaching tax implications. The one thing she cannot do is ignore the tax issue. As a surviving spouse, you have one option that nobody else has: rolling over inherited IRA assets into your own IRA and treating these assets as if they were your own. This may be a good choice if she doesn’t have an immediate need for her spouse’s IRA assets and is looking to keep the money in a tax-advantaged account for as long as possible. If she has not reached age 701?2 but her spouse has, this option enables her to delay taking distributions until you reach age 701?2, rather than continuing her spouse’s minimum required distributions (MRDs).
If she is under age 591?2 and she does need to access some or all of the assets she inherit from a traditional IRA, she will be subject to a 10% early withdrawal penalty if she rolls those assets into her own IRA and then takes a distribution. If she finds herself in this situation, she can take withdrawals penalty free, even if she’s under 591?2 if she instead transfers the assets to an Inherited IRA, also known as an IRA beneficiary distribution account. No matter which option she chooses, the rules for MRDs will still apply. This means she must withdraw a certain amount of money from her IRA, including inherited assets, each year once she reaches age 701?2. Her tax consultant should be able to assist her.
Slightly different guidelines apply to Roth IRAs. Specifically, if she has inherited her spouse's Roth and she’d like it to continue to grow tax-free she should transfer the account to her own name and treat it as her own account. Why? Because with Roth accounts you aren't required to take any minimum withdrawals from your own account as long as you live
For estate planning purposes, the beneficiary of a Roth IRA has an asset which will grow at a compounded rate tax-free for their lifetime, and any withdrawals made will be completely tax-free. Note that the Roth IRA is still subject to Inheritance Tax and Federal Estate Tax at the owner's death. Your sister would be wise to work with a tax consultant and experience financial advisor.
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Liz, it sure is different. Take a look at her statements. I know they are sometimes difficult to read, but look for the different lines that say IRA or Roth IRA. There should be different account numbers. If they exist, simply point it out to the financial advisor.
Both IRA’s and Roth IRA’s have named beneficiaries. If you are a named beneficiary, you can claim the account directly from the financial institution.
I wrote a guide about the differences between the two. Please review Should I Convert to a Roth IRA It explains the differences between the 2