Roth conversions for Inherited IRAs?
Notice 2008-30 allowed Roth conversion for beneficiaries of qualified plans, but not inherited IRAs. I can’t find any reference to that inequity being fixed, but wondered if anyone else is aware of actual changes that will now allow Roth conversions of Inherited IRAs. Alternatively, are there any IRS proposals to fix this?
Permalink Submitted by Alan Spross on Fri, 2011-09-16 18:09
There have been no changes and there also have been no proposals in Congress that generated any traction behind them to change this. However, the general trend toward more complete portability along with the US Treasury thirsting for tax revenue would appear to indicate that the chances for non spouse inherited TIRAs to be converted at some point in the future are good.
The case for allowing rollovers of these inherited IRAs is also compelling since this results in many beneficiaries taking distributions that become irrevocably taxable. This is the largest and most costly error people make, and it would make good sense for Congress to eliminate both these restrictions in the near future.
Permalink Submitted by Bruce Steiner on Fri, 2011-09-16 22:12
It would be even more helpful if a beneficiary could convert an inherited IRA, since a beneficiary could then spread the conversion out over a number of years if that’s preferable to converting all at once in a given case. Stay tuned.