Primary vs. Contingent Roth IRA

by Allison Westbrook

A Roth individual retirement account (IRA) provides you with a long term savings account to help you fund your retirement years. You contribute taxable income to your IRA and invest it during your working years, and that money grows over time. When you begin to make withdrawals, the withdrawals are tax-free. Though you may intend to live well into your retirement, as the owner of a Roth IRA, it is your responsibility to name a beneficiary to the funds should you pass away before you begin taking withdrawals or before the money in your account reaches depletion.

Primary Beneficiaries

All individual retirement accounts require the naming of a primary beneficiary. This is the person or persons who will inherit the money in your IRA if you die before using it. Usually, you would name your spouse or children as your primary beneficiaries.

Contingent Beneficiaries

Though you may plan for your spouse or child to take over your IRA if you pass away before retirement, circumstances may not allow for that. For instance, if you are single and name your only child as your primary beneficiary, but your child passes away before you, there is no longer a beneficiary to your IRA. In such a case, had you named a contingent beneficiary -- that is, someone to inherit your IRA in the event that your primary beneficiary cannot -- the IRA would pass along to another named individual, such as a grandchild or sibling.


Though laws vary by state, most IRA plans require that your estate receive your IRA funds should you die prematurely without a named beneficiary. According to the Equity Trust Company, however, this could cause tax headaches with those who inherit your estate. Because you have already paid income taxes on the money in your Roth IRA account, your heirs will not pay income taxes on that money. However, the money is still subject to the estate tax -- otherwise known as the “death tax.” The federal tax code provides advantageous taxation for individuals in comparison to estates. The highest tax bracket in the U.S. as of the time of publication is 35 percent -- a bracket reached for an estate at only a fraction of the value an individual must have in taxable annual income to reach it.


Rather than name individual primary and contingent beneficiaries or face the possibility of your estate inheriting your retirement account funds, you may also want to consider leaving your IRA to a trust. According to CNN, an irrevocable trust usually costs less than $5,000 and provides your heirs with regular annual payments from the account to help them avoid paying exorbitant taxes on a one-time lump sum payment.

About the Author

Allison Westbrook is an experienced writer of three years with a passion for creating relevant articles for a wide readership. She attended Kilgore College and majored in English. Allison's articles have appeared on such websites as eHow and Her reflective writing angles deliver focused and consistent content.

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