Recharacterize Inherited IRA
Surviving spouse (currently 68) is named beneficiary on wife’s IRA at the time of her death in 2009 (at age 65) prior to her having taken distributions. Surviving spouse chacterized IRA as “Inherited IRA” in order to delay taking RMD until the time she would have been 70 1/2.
Is it possible to:
1. Convert all or part of Inherited IRA to Roth
2. Recharacterize back to traditional from inherited IRA in order to convert all or part to Roth?
Thanks
Permalink Submitted by Alan Spross on Mon, 2011-03-21 19:58
1) Yes, all or part of the inherited IRA can be converted to an owned Roth IRA. Might want to do a partial over 3 or 4 years to control the tax bill.
2) The inherited IRA IS a traditional IRA now, just titled in inherited format. The conversion can be done in just one step without any recharacterization. The process transfers directly from the inherited IRA to the Roth IRA.
If the deceased spouse had any basis in her IRA (Form 8606), this was inherited and would make the conversion only partly taxable instead of fully taxable.
If a conversion is done and the Roth value then drops, the conversion could be recharacterized to an owned TIRA, not back to an inherited TIRA.