inherited IRA rollover to a Roth Ira
I have a client that his wife died and she had a 401K Plan and he rolled it over to a roth IRA.He has inherited An IRa from his Father ‘death and wants to roll it over to the Roth IRA that he established @ his wife’s death. Can he do this?
Permalink Submitted by Alan Spross on Mon, 2009-07-13 18:38
No. At this time a non spouse inherited TIRA cannot be converted to an inherited Roth IRA as can be done with an inherited non spouse employer plan. Even if this is changed in the future, it would be an inherited Roth, not an owned Roth IRA like the one he funded with his wife’s 401k rollover. It would have to be kept separate from the owned Roth and would have RMDs. Congress might approve these Roth IRA transfers at some point in the future but at this point it must remain as an inherited TIRA.
Client will be taxed on the full 401k Roth conversion, and should not be completing conversions that could drive him into a higher tax bracket than what he expects to pay on average in retirement. Even if he could have converted the IRA from his father, that might inflate his tax bracket when added to the other conversion in the same year. But he can always do a partial recharacterization if the tax bill turns out to be excessive.
Permalink Submitted by Bruce Steiner on Mon, 2009-07-13 21:07
While I am not aware of any authority that would permit converting an inherited IRA to a Roth, I think an argument can be made that it should be permitted. I hope I’ll have the opportunity to apply for a private letter ruling on this, perhaps after the end of 2009 when the $100,000 income cap on eligibility to convert expires.
Bruce Steiner, attorney
NYC
also admitted in NJ and FL