Roth Conversion Taxes at Death
I have a client with terminal cancer – she’s not expected to live more than a year. She’s thinking of converting her Thrift Savings Plan (similar to a 401(k) in the private sector) to a Roth to leave her heirs with a tax-free inheritance. If she converts in 2010 and decides to pay the taxes in 2011 and 2012, what happens if she passes away prior to that? Can the taxes still be paid over two years, or would the entire taxable amount be added to her final tax return?
Permalink Submitted by Alan Spross on Tue, 2010-04-06 03:50
The remaining taxable amount would have to be added to her final return for the year of death unless there is a spousal beneficiary. A spousal beneficiary is able to continue the 2 year deferral schedule of the decedent, but a non spouse beneficiary cannot.