Inherited IRA to Roth?
I think I know the answer to the first part, it’s the second I’m curious about.
Non-spouse beneficiary inherits an IRA. Deceased was 76 years old.
Can non-spouse beneficiary convert the inherited IRA to a roth?
Off the top of my head, I’m pretty sure the answer is no.
That puts the question into my head of “why not?”
Can anyone clarify this for me?
Permalink Submitted by Alan Spross on Fri, 2010-09-24 19:22
Presently, an inherited qualified plan can be converted to an inherited Roth IRA by a non spouse beneficiary, but NOT an inherited TIRA as you correctly thought. This obvious inconsistency may well result in the TIRA rules being broadened to allow these conversions, but no specific legislation has been proposed yet.
I don’t know how this came to be, but since a conversion is a distribution and rollover and a non spouse beneficiary is not eligible to roll over an inherited IRA, that might explain the long standing inherited IRA rule. The surprise came with Notice 2008-30 where non spouse beneficiaries were allowed to convert, perhaps due to the ease of changing Sec 402 to allow for eligible rollover distributions of this type. I think this is a matter of time as the trend is for more consistency and portability. The trend is also enable Roth conversions to generate current tax revenue to pay for current legislation. This is illustrated in the new jobs bill where qualified plans will be allowed to offer limited Roth conversions within the plan starting as soon as the plans can be amended.
Permalink Submitted by Michael Clancy on Fri, 2010-09-24 19:49
Thank you very much Alan,
I was thinking along the lines that the inconsistency would eventually get addressed too. I mean, it will generate more tax revenue.
I think the timing of beneficiary distribution rules and improvements to conversion rules leapfrogged each other and left the inherited IRA to Roth concept behind.