Roth
I’m working with a grandma, age 74, with 3 grandchildren (twins age 1 and a 2 month old). She would like to make a gift to each grandchild for $5,000 each. She has approximately $100,000 in an IRA account and only taking minimum distributions. Can we convert $15,000 of the IRA to a Roth and then make a gift to the grandchildren from the converted Roth while she is alive? If so, what is the tax implication to grandma and the grandchildren
Permalink Submitted by Jose Morales on Thu, 2010-05-27 16:12
Is the goal to allow your grandmother to gift the $15,000 to the grandchildren with no tax consequences? If so you will not acheive this by first converting the funds to a Roth and then withdrawing the funds from the Roth to give to the grandchildren. The reason being, the conversion itself is reportable and most likely taxable. There isn’t going to be any additional benefit to your grandmother to process a conversion just for the purpose of gifting the funds to her grandchildren.