Spousal IRA bene converting to Roth

Submitted by Robert Vashko on Fri, 2019-08-16 17:21

I know that a spousal IRA beneficiary can initially choose to take as a beneficiary and then perform a spousal rollover at a later time. Initially taking as a bene makes sense when the surviving spouse is under 59.5 and needs to draw from the IRA now.

I also know that you cannot convert an inherited IRA to a Roth.

Question (and maybe it’s an academic one): if a surviving spouse bene on an IRA wanted to convert the account to a Roth in their own name, would (s)he be required to perform the spousal rollover first and then convert? Or do surviving spouses have the ability to convert the inherited IRA straight into their own Roth? In other words, can they eliminate the middle step of the spousal rollover before converting?

I recognize that middle step isn’t a huge hurdle, but just curious from a technical standpoint if it’s actually necessary.



Submitted by Alan - IRA critic on Fri, 2019-08-16 20:07

  • An IRA inherited from a spouse is not treated as an inherited IRA per Sec 408(d)(3), therefore it can be rolled over either to another IRA by a spousal beneficiary or to a Roth IRA. Therefore, the inability to convert an inherited IRA is limited to non spouses, just as the inability to roll over an inherited IRA. A conversion is always a two part transaction, reported as a distribution on Form 1099R and as a conversion contribution on Form 5498. 
  • Therefore, there are several ways to convert for a spousal beneficiary. They can elect ownership and then convert, or take a distribution and roll it over to a Roth IRA, so in most respects your question is an academic one. However, there ARE RMD implications if a distribution is taken from an inherited IRA with the intent to convert since an RMD (beneficiary RMD or owner’s year of death RMD) is not eligible for rollover whereas just an election of ownership is not treated as a distribution and the distribution then comes from the surviving spouse’s own TIRA. Therefore, it is preferable for the surviving spouse elect ownership first unless they want to leave some of the balance as inherited if under 59.5.

Submitted by David Mertz on Fri, 2019-08-16 21:13

  • I’m not aware of any specific guidance from the IRS on this issue, but I agree with Alan-iracritic’s assessment.
  • Another possible difference between making the deposit directly to the Roth IRA and first moving the money into an owned traditional IRA would be if either the deceased spouse or the surviving spouse had basis in nondeductible traditional IRA contributions.  It seems that if the surviving spouse took a distribution from the inherited IRA and deposited it directly into their own Roth IRA that only the basis in the inherited IRA would apply to determine the taxable amount.
  • I’m certain that the tax-return software that I use cannot handle reporting the direct deposit into a Roth IRA, only permitting the distribution to a spouse beneficiary from an inherited traditional IRA to be reported as rolled over to an owned traditional IRA (nontaxable).

Submitted by Robert Vashko on Fri, 2019-08-16 21:58

Thank you both.

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