Investments in Roth IRAs are advantageous for investors concerned about minimizing long-term federal income taxes.

Investing in Roths or converting to Roths makes sense for many investors. Although they incur federal income taxes, after five years and after you reach 591/2, all income and capital gains are obtained tax-free.

The beneficiaries of Roth accounts also enjoy tax advantages. However, it is important that both Roth investors and their beneficiaries understand how to ensure the maximum tax advantages.

If you are a Roth investor, you must establish your beneficiaries with care. You must fill out the proper forms supplied by your financial institution specifying your beneficiaries. This designation will take precedence over anything you specify in your will.

There is an advantage to naming your spouse as the beneficiary. Investors in Roths know that they do not have to be concerned with required minimum distributions, or RMDs, when they reach 701/2. If you name your spouse as the beneficiary, they can roll the account into their own name and also continue to avoid RMDs.

There is no requirement for a spouse who inherits a Roth to take annual distributions. Spouses will be able to make withdrawals when they wish with no income tax liability.

Non-spouse beneficiaries are required to take annual withdrawals over their expected lifetime. Accordingly, if you name a young beneficiary, such as a grandchild, they will be able to “stretch” their inheritance longer than an older beneficiary.

If your beneficiary does not make annual withdrawals, as prescribed by IRS regulations, he or she will be required to take the distributions within a five-year period.

I recommend that you inform your spouse and other beneficiaries, orally and in writing, of the advantages of the Roth inheritance and the steps they should take. You should also make sure that the executor is knowledgeable regarding these steps.

I recommend you identify for your beneficiaries a proper contact at the financial institution that maintains the account.

Just as it is important for you to name the beneficiaries of your Roth, it is important for your spouse, after he or she rolls the account into his or her name, to name beneficiaries the same way you filled out the proper forms with the financial institution maintaining the account.

If you do decide that you want to name young children as beneficiaries, you may have to consider the use of a trust.

However, you should only use a trust if your attorney has expertise in this area. Ed Slott, the leading expert in retirement accounts, points out that some attorneys do not have the required expertise to advise clients regarding retirement plan issues.

With a properly drawn-up trust, required minimum distributions will be made based on the expected life of the beneficiaries. If the attorney does not establish the trust properly, the IRS can mandate that the assets of the trust must be distributed within five years. That is likely not to the maximum benefit of your beneficiaries.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.