Two out of three Americans want to leave a legacy. There is a great account for doing this.

When you have children, it’s natural to want to give them the best. And you might even have goals to set financially, even if you can no longer provide that kind of support.

Recent data from Empower shows that 67% of families say they want to leave a legacy for their loved ones. And if that’s your goal, there’s one retirement account in particular that can help you focus.

A Roth IRA gives you flexibility.

The great thing about a traditional individual retirement account (IRA) is that the funds you contribute are tax-free, allowing you to save money up front. With a Roth IRA, there is no tax deduction for the money you invest. However, unlike traditional IRAs, Roth IRA withdrawals are not taxed. And Roth IRA investment earnings are tax-free. With a traditional IRA, these gains are only deferred, so you end up paying taxes on them. Especially when making withdrawals.

Another key difference between Traditional IRAs and Roth IRAs is that with the latter, you are not forced to take required minimum distributions (RMDs). RMDs are designed to allow you to spend much of your savings tax-advantaged over your lifetime.

The IRS doesn’t necessarily want tax-advantaged retirement plans to serve as a means for wealthy people to pass on wealth to their heirs. Therefore, depositors are charged RMDs to withdraw funds from their accounts each year when they reach a certain age.

However, Roth IRAs do not charge RMDs. If you don’t need all of the money you save in retirement, you can set aside some or all of it for your children. And the good thing is that Roth IRA earnings aren’t taxed on retirees, so your heirs can get that money tax-free, too.

Either way, it is a good idea to consult with an estate planning attorney

Overall, a Roth IRA can serve as a great savings tool that allows you to save for retirement and leave some of that money for the people you care about most. However, the rules for inherited Roth IRAs can be somewhat complicated. And there may be alternative means of setting up your inheritance that are more financially advantageous for you and your children.

Therefore, if you are certain that you want to leave an inheritance, it is a good idea to consult with an estate planning attorney. A specialist in this area can guide you and your child through your options and help you reach the best solution.

For example, your attorney may advise you to consider a living trust for your children as a means of passing on wealth. Alternatively, we may suggest a combination of accounts.

Your attorney can also tell your child what to do when it comes time to use an inherited Roth IRA. That alone will give you more peace of mind.

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