Often when creating your estate plan, the best tools are those that will allow the smoothest conversion from you to an heir after your death. Trusts are quite popular for this reason. However, a Roth IRA can be just as good of a tool as long as you understand the rules that will help you to maximize the money in the account while avoiding taxation.
A Roth IRA, according to MarketWatch, is not subject to annual minimum withdraw rules like a traditional IRA. The traditional rules are that you must make withdraws starting at age 70 1/2. So, if you have a traditional IRA and covert it prior to turning 70 1/2, you avoid having to withdraw your money. You can then use the Roth IRA to fund your estate for inheritance purposes.
After your death, your heir will have to withdraw according to new rules. However, the money is tax-free as long as the account is at least five years old. Also, your heir can take out only the minimum requirement, leaving the rest of the money in the account. This can allow for a Roth IRA to fund heirs for generations.
When you convert, there will be tax penalties, but you can plan for this. Plus, with you paying the taxes now, it takes that burden away from your heirs.
With a Roth IRA, you can avoid estate taxes and eliminate a tax burden for your heirs at the same time. You also can look out for future generations if you have enough funds in the account and if all heirs only withdraw the minimum required amount.