A Roth IRA is an individual retirement account (IRA) that is funded with money on which income taxes have been paid—but distributions may be taken without paying income tax (tax free) if certain conditions are met—for example if you are at least 59 ½ years old when you begin taking distributions and have had a Roth IRA account for at least five years.

There are no required minimum distributions (RMDs) in the original Roth IRA account owner’s lifetime. And the original Roth IRA account owner can provide their heirs with years of tax-free income (distributions) by properly designating a beneficiary or using the proper trust (a conduit trust) that takes out the required minimum distributions each year.

Because of the complexity, pitfalls, and laws that are constantly evolving, a Roth IRA account owner who wants to leave this asset to heirs should consult with a legal or financial professional who is familiar with the rules.

In New Jersey, as in all states, Roth IRAs are governed by federal law, not state law. The key features of a Roth IRA include contributions with after-tax dollars and the potential for tax-free distributions if certain conditions are met, such as the account holder being at least 59 ½ years old and having held the account for a minimum of five years. Unlike traditional IRAs, Roth IRAs do not require minimum distributions during the lifetime of the original account owner, allowing for the possibility of leaving tax-free income to heirs. Beneficiaries of Roth IRAs can continue to receive distributions tax-free, provided the original account has been in existence for at least five years. When planning for estate purposes, the account owner can designate a beneficiary directly or use a conduit trust to manage distributions. Due to the intricacies and the evolving nature of tax laws, it is advisable for Roth IRA owners in New Jersey to consult with an attorney or financial advisor who is knowledgeable about current regulations to ensure proper estate planning and beneficiary designation.