Roth Conversion From Bene IRA
Is it possible to do Roth conversions out of a Beneficiary IRA? Clients husband died, she’s in her 40’s. Thinking we’ll convert some of his IRA money to Roth in the future. Not sure if we should set up a beneficiary IRA or if we need to roll his IRA money into her IRA in order to do Roth conversion. Thanks for your help.
For future reference, can a non-spouse do a Roth conversion from a beneficiary IRA?
Permalink Submitted by Alan - IRA critic on Thu, 2015-09-03 19:28
A non spouse TIRA beneficiary cannot convert the TIRA to an inherited Roth IRA. For the client, a beneficiary IRA should be established so she can access funds before age 59.5 without penalty. She would not have RMDs on the beneficiary IRA until the year her husband would have reached 70.5. Once she has the beneficiary IRA established, she could then convert incremental amounts to a Roth IRA if that is beneficial. The Roth conversions she does would not be available without penalty for 5 years, so that should be considered. As for taxes on Roth conversions, if her husband passed this year, it is the final year to file jointly. Her tax rate could be higher or lower for this year as compared with the rate when she files single status. Depends on the affect of his income ceasing.