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Illinois Estate Planning and Roth IRAs

The maximum contribution to a Roth IRA in 2010 and 2011 is $5000, and if you are 50 years or older by the end of the year it is $6000. The top modified Adjusted Gross Income (AGI) for a full contribution for Single individuals in 2010 is $105,000 and in 2011 is $107,000. The AGI for Married individuals filing jointly is $167,000 in 2010 and $169,000 in 2011.

Typically, individuals choose to convert to a Roth IRA because they believe their taxes will be higher in retirement or they are decades away from needing the cash. However, a Roth is an excellent way to pass on wealth. There is no distribution requirement with a Roth as there is with a traditional IRA. Once funds are in a Roth, you will never have to pay income taxes again and neither will your children, grandchildren or anyone else who inherits the Roth account.

Keep in mind that a conversion from a traditional IRA to a Roth is worthwhile only if you can pay the taxes for the conversion from outside savings.

Contact your estate planning or elder law attorney for more information.

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