Inherited IRA to Roth
Have 3 boys that are 25,21,14 have inherited IRA for 30k each. Have been taking RMD.
Was wondering abouteach converting to a Roth in their name paying the taxes in their current bracket and therefore setting this up for a great tax free retirement!!
What are the negatives other than paying the tax?
Permalink Submitted by Anonymous (not verified) on Thu, 2010-01-28 01:16
The biggest negative is that they are not allowed to convert.
pko
Permalink Submitted by tomd37 on Thu, 2010-01-28 03:28
An IRA inherited from a non-spouse cannot be converted to a Roth IRA, nor can it be combined with any other IRA the beneficiary might have. Distributions from the IRA must start the year following the death of the previous owner using the factor found in Table I of IRS Publication 590. The life expectancy factor is based on the age of the beneficiary at the end of the year of the year following the previous owner’s death. Also contributions cannot be made to the inherited IRA.
Tom D
Permalink Submitted by Michael Pinion on Thu, 2010-01-28 15:45
So what you guys are telling me that I cannot convert this inherieted IRA to a Roth. So could the customer remove $5000 a year from the inherited IRA account pay the taxes on that and put that in the ROTH.
Permalink Submitted by Edward Czapor on Thu, 2010-01-28 15:52
Any amount desired can be withdrawn as long as at least the RMD is taken out. Amounts withdrawn could then be used to fund a contribution to a Roth IRA if otherwise qualified.
Permalink Submitted by Michael Pinion on Thu, 2010-01-28 17:37
My last concern on this would the $5000 withdrawal for the 14 yr old be listed as earned income so that he then coud put it into the Roth?
Permalink Submitted by Edward Czapor on Thu, 2010-01-28 19:01
A withdrawal from the IRA is not earned income and could not be used by itself for an IRA contribution. He would need earned income from another source such as wages.
Permalink Submitted by Anonymous (not verified) on Thu, 2010-01-28 19:04
Source:
http://www.irs.gov/publications/p590/ch01.html#en_US_publink1000230355
pko