Can inherited stretch IRAs be rolled over to ROTH IRAs?
I understand that traditional (deductible and non-deductible) IRAs can be rolled over to ROTH IRAs in 2010, regardless of income. Income taxes will be due on any before-tax dollars in the traditional IRAs at the time of the rollover. Can an inherited stretch IRA also be rolled over to ROTH IRAs in 2010? Can the IRD deduction applicable to stretch IRA RMDs be used to reduce the tax burden at the time of the rollover?
Permalink Submitted by Tom Rogers on Wed, 2007-11-07 06:07
Only in the instance where the surviving spouse inherited the IRA and it was rolled over to his /her IRA . For any any other inherited IRA’s (eg from mother to son ) this would not qualify for the Roth conversion both now or for that matter in 2010.
Permalink Submitted by Alan Spross on Wed, 2007-11-07 06:17
A non spouse inherited TIRA cannot be converted to a Roth IRA, and this does not change in 2010. The IRD deduction could be applied to the RMDs for the inherited non spouse TIRA. A surviving spouse who makes an inherited IRA their own can then convert it to a Roth IRA whenever eligible. While it is rare that the first spouse to die would pay estate tax, if they did the surviving spouse would be entitled to an IRD deduction.
For eligible Roth conversions in 2010, the actual default tax bill is deferred to 50% in 2011 and 50% in 2012. However, the taxpayer will have the option to “opt out” of the deferral and pay the full tax bill due for 2010. They may be a good strategy to use if converting small amounts over consecutive years.