pension plan rollover to roth ira
I have a client who is inheriting her father’s pension plan. The company has sent her paperwork to a) do a lump sum distribution, b) rollover to ira or c) rollover to roth ira. If she rolls over to a roth ira, she will not be required to take distributions. Is that correct?
Permalink Submitted by Alan Spross on Mon, 2010-08-16 23:52
No. A non spouse beneficiary must take RMDs from an inherited Roth IRA in the same manner they would from a non Roth account. The daughter CANNOT own the Roth IRA, but will maintain only a beneficiary interest.
For a 2010 conversion, the income can be split between 2011 and 2012, but there will also be RMDs due for those years. Before converting, if father did not take his 2010 RMD, that RMD should be distributed to the daughter since it cannot be converted.
She should be able to split the account between an inherited TIRA and an inherited Roth IRA. That would keep the amount of taxable income under control notwithstanding the 2 year deferral.
If there is highly appreciated employer stock in the plan, NUA benefits should also be considered in the mix of options.