Inherited IRA to ROTH via traditional IRA

Submitted by Charles Foster on Mon, 2020-11-09 22:29

Have a 70 year old client, her husband was 9-years younger passed away. We have treated his IRA as an inherited IRA to delay future RMD’s. However, she wants to convert $80,000 to ROTH. We have set up a traditional IRA in her name. Plan to move $80,000 from the inherited IRA to the traditional IRA in her name, then convert the $80,000 traditional IRA to a ROTH. She has outside funds to pay the taxes. Being 2020 (no RMD’s) and her being younger than 72 we are not concerned about reducing the conversion by the RMD amount. Are there any current or future tax implications we should be concerned about? Should we be concerned about RMD’s for any reason? Thank you.



Submitted by Alan - IRA critic on Mon, 2020-11-09 22:57

  • With these respective ages, there is no technical reason not to pursue this. For the remaining value in the inherited TIRA, her beneficiary RMDs would not begin until the year husband would have reached 72.
  • Of course, she will still owe taxes on the conversion at the higher single rate unless husband passed this year, so the conversion tax rate should be compared to likely future marginal rates.
  • Best to move the 80k to the TIRA by direct transfer (or take a distribution and convert without going through the TIRA) to avoid using up the one allowed 60 day rollover per 12 months. The conversion will not count as a rollover but a distribution from an inherited IRA rolled into her own IRA would count.

Submitted by Charles Foster on Wed, 2020-11-11 18:39

Alan, thank you for the comment.

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