Converting an Inherited IRA
Ed wrote a short article in Financial Planning in May 08 in which he noted that non-spouse inherited IRA beneficiaries are not eligible to take advantage of the Roth conversion opportunity. Is this still the case?
Ed wrote a short article in Financial Planning in May 08 in which he noted that non-spouse inherited IRA beneficiaries are not eligible to take advantage of the Roth conversion opportunity. Is this still the case?
Permalink Submitted by tomd37 on Tue, 2009-09-22 20:48
Yes, and the non-spousal inherited IRA must be kept separate from IRAs owned by the beneficiary.
Tom D
Permalink Submitted by Alan Spross on Tue, 2009-09-22 21:39
Tom is right.
But note that what is new is that a non spouse that inherits a qualified retirement plan (401k, 403b, 457) CAN convert all or part of the account to an inherited Roth IRA. Since this Roth is inherited and not owned, RMDs will apply to it.
Eventually, for the sake of consistency if nothing else, you might expect Congress to bring these plans into concurrency for conversion purposes, either extending the conversion to inherited IRAs or rescinding the conversion for non spouse QRP beneficiaries. But as of now, NO conversion possible for non spouse inherited IRAs.
Permalink Submitted by Bruce Steiner on Wed, 2009-09-23 02:18
I know that there is no authority for it, but I think one can make an argument that it should be possible to convert an inherited IRA to an inherited Roth IRA. I hope I’ll have the opportunity to apply for a private letter ruling on this next year when the $100,000 income cap expires and this becomes an issue for higher income taxpayers.