Wyoming Roth IRA

Opening a Wyoming Roth IRA will expand your retirement planning strategy to include tax free distributions after you retire. Because the funds you contribute to a Wyoming Roth IRA are deducted from post tax income, you won't be required to pay income tax on this money when you collect distributions, provided that you meet the eligibility requirements established by the IRS. If you are at least 59 1/2 and you have had the account for 5 years, you should be able to collect tax free distributions when you retire in WY.

Some Wyoming investors choose not to collect distributions from their Roth IRA account. Unlike a traditional IRA, which has a minimum distribution requirement, a Wyoming Roth IRA does not require that you begin making withdrawals at any particular age. As long as your income does not exceed maximum limits, you may continue to make regular contributions and allow your funds to earn interest and dividends for as long as you wish. As part of the estate planning process, you may leave your Roth account to your spouse, children, grandchildren or others who are close to you.

Inheriting a Roth IRA

Whether you live in Cheyenne, Casper, Laramie or Gillette, family is important in Wyoming. In this mountainous Western state, residents rely on each other to improve their quality of life from one generation to the next. Mining and ranching have always played important roles in the state's economy. WY also draws tourists from around the world to view its spectacular natural sights, like the Grand Tetons, Yellowstone National Park and Devils Tower.

Inheriting a Wyoming Roth IRA can make a big difference in your financial circumstances. However, the funds you inherit are subject to IRS guidelines and restrictions. If you inherit a Wyoming Roth IRA from a deceased spouse, you have the option to take over the account and treat it as your own. You may continue to make contributions to the account, allowing it to increase in value over time, then pass along the funds to the next generation in your WY family.

Alternatively, you may decide to use the funds from a deceased spouse's account to pay for final expenses and medical bills, cover unpaid debts or maintain your current standard of living. You may also combine the funds from a spouse's account with a Wyoming Roth IRA of your own. When you inherit an account from a spouse, you have a great deal of flexibility in the way you utilize these resources.

If you inherit an account from someone who is not your spouse, your options will be more limited. An inherited Wyoming Roth IRA may not be treated as your own or combined with your own accounts. You may collect distributions from inherited accounts without the usual tax penalty, as long as the original owner made contributions for at least 5 years. The IRS requires that you collect distributions by the end of the 5 year period following the death of the original Wyoming owner or have the funds distributed throughout your lifetime. [1]

Because taxes on an inherited Wyoming Roth IRA have already been paid by the original owner, the beneficiaries are not required to pay income tax on these funds, as long as the 5 year requirement has been met. However, if these funds are part of an estate that exceeds the maximum value established by the IRS, you may owe estate taxes on this money. Talk with a Wyoming investment advisor about how you can make the most of your inheritance while paying minimal tax penalties.

Conversion Tax

After learning about the benefits of a Roth IRA, you may decide to convert a traditional account to a Roth IRA. If you make this conversion, you will be required to pay income tax on the funds that are converted. The converted amount will be considered part of your income for that taxable year. As of 2011, investors are required to include the entire converted amount in a single year's income rather than disbursing it over two years. If you change your filing status or get divorced in Wyoming during this two year period, this will not affect your tax obligations.

When you're converting retirement funds, a change in taxation status may affect your income and may affect your Wyoming retirement goals. A knowledgable financial advisor can guide you through the process of converting your Wyoming Roth IRA without incurring large penalties. Talk with an investment consultant or a retirement planner about how a conversion fits into your income projections for the years after you stop working. With a Roth IRA, you can enjoy tax free income after the age of 59 1/2 if you meet the IRS eligibility requirements.

http://www.irs.gov/publications/p590/ch02.html#en_US_2011_publink1000231030 01/21/2012

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