A Roth IRA is funded with after-tax dollars. After five years and after age 59 1/2, all withdrawals are tax-free.
What’s more, there are no minimum required distributions from a Roth IRA. If you don’t need the money, you can pass on the account to beneficiaries, who can stretch tax-free distributions over their life expectancy.
Even though a Roth IRA avoids income tax, it will be included in your taxable estate. If you are concerned with estate tax, you can take tax-free distributions from your Roth IRA and use the money to buy insurance on your life.
If the life insurance policy is held in an irrevocable trust, the death benefit will avoid estate tax. Then those death benefits can be used to pay the estate tax bill and the Roth IRA can be passed on to your beneficiaries, free of estate and income tax.