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 South Carolina, as in all states, Roth IRAs are governed by federal law, specifically the Internal Revenue Code. Contributions to a Roth IRA are made with after-tax dollars, meaning the money has already been subject to income tax. Qualified distributions from a Roth IRA, including earnings, are tax-free provided certain conditions are met, such as the account being at least five years old and the account owner being 59 1/2 years of age or older. Unlike traditional IRAs, there are no required minimum distributions (RMDs) for the original owner of a Roth IRA, allowing the potential for the funds to grow tax-free for a longer period. Upon the death of the account owner, beneficiaries can inherit the Roth IRA and may be able to take distributions tax-free. However, non-spouse beneficiaries are required to take distributions over a 10-year period due to the SECURE Act of 2019. It is important for Roth IRA owners in South Carolina to designate beneficiaries and consider the use of trusts, such as a conduit trust, to manage the inheritance of their IRA in a tax-efficient manner. Given the complexities and the potential for tax law changes, it is advisable for Roth IRA owners to consult with an attorney or financial advisor to ensure compliance with current regulations and to optimize estate planning strategies.