Roll Over Inherited IRA
I have a client who wants to roll over their Inherited (401K) IRA to an ROTH annuity this year 2012. I know they will have to pay taxes on whatever the roll over. My question is can they do this?
I have a client who wants to roll over their Inherited (401K) IRA to an ROTH annuity this year 2012. I know they will have to pay taxes on whatever the roll over. My question is can they do this?
Permalink Submitted by Alan Spross on Wed, 2012-03-07 20:57
What did they inherit – a 401k or an IRA?
Are they a non spouse?
Permalink Submitted by Peter Lingane on Thu, 2012-03-08 04:01
Alan’s questions are very perceptive!
Permalink Submitted by RICHARD MCKINNEY on Thu, 2012-03-08 21:58
In response to the previous question, it is a IRA and they are not the spouse. There was no spouse and the client was an only child (age 54).
Permalink Submitted by Alan Spross on Thu, 2012-03-08 22:10
No, they cannot do it.
An non spouse inherited IRA cannot be converted to an inherited Roth IRA under current law.
There may be reason to think that this may be changed at some point because a non spouse inherited employer plan (401k) CAN be rolled to an inherited Roth IRA. If this inconsistency is eliminated, it would result in the tax code being changed to allow for the conversion of inherited IRAs. There are no current proposals to allow this however.