ORDER FOR QCD (RMD) AND ROTH CONVERSION
I plan to take my 2021 RMD from my TIRA as a QCD. I also plan to convert to Roth from my inherited TIRA. does the QCD/RMD have to be done before the conversion?
I plan to take my 2021 RMD from my TIRA as a QCD. I also plan to convert to Roth from my inherited TIRA. does the QCD/RMD have to be done before the conversion?
Permalink Submitted by Alan - IRA critic on Tue, 2021-09-28 22:35
You cannot convert from an inherited IRA unless you are the surviving spouse. If you are over 70.5 you can do a QCD from either an owned IRA or an inherited IRA, or both. If you want all of the QCD to offset taxable income, you must complete the QCD before you complete the RMD. Again, if you want to convert, it must be done from your own IRA, and after your RMD has been completed from your owned IRA. You can do this before completing your RMD from the inherited IRA.
Permalink Submitted by MICHAEL DOHRING on Sat, 2021-10-30 14:19
Where specifically is the supporting documentation for the spousal exception. My IRA custodian is not aware of this provision.
Permalink Submitted by Alan - IRA critic on Mon, 2021-11-01 00:17
If you are referring to conversion of an inherited IRA distribution which is not an RMD due to the elected 10 year rule, such a distribution to a surviving spouse can be rolled over per Sec 408(d)(3)(C)(ii)(II), which states that for rollover purposes, an IRA is not treated as inherited if the beneficiary is the surviving spouse. Further, a former statement in Pub 590 that indicates an inherited IRA cannot be converted has been removed without explanation or clarity, so an IRA custodian may be reluctant to process a conversion (by transfer or 60 day rollover) without the inherited IRA distribution being rolled over to your own IRA first.
Rather than debate this with them, and assuming there are not IRA basis implications of the taxable amount of this conversion, you could roll the distribution over to your TIRA, and then convert it if you have already completed your QCD and owned IRA RMD before doing the conversion. That should not affect your owned IRA RMD for the following year since the converted amount will no longer be in your year end balance.
Permalink Submitted by MICHAEL DOHRING on Wed, 2021-09-29 13:46
Thanks. I am the surviving spouse and my inherited TIRA is under the 10 year rule so no RMD’s. My real need was to confirm wether both IRA’s were linked in regard to my owned TIRA’s RMD which will be a QCD. Thanks again.
Permalink Submitted by Alan - IRA critic on Wed, 2021-09-29 17:54
Just to be sure, you stated that your inherited IRA from your spouse is under the 10 year rule. Since a spouse is an eligible designated beneficiary (EDB), you would not ordinarily be under the 10 year rule, but rather life expectancy RMDs. However, if your spouse passed prior to their RBD (which now depends on their DOB due to the Secure Act), you have the option to opt out of life expectancy and into the 10 year rule, but not if your spouse passed on or after the RBD. Since you apparently plan to convert only part of the inherited IRA to an owned Roth IRA, you must be sure what is left qualifies for the 10 year rule or you run afoul of converting before you completed the inherited IRA RMD. This gets pretty complicated, and in fact the IRS itself has had issues interpreting the intent of the Secure Act.
Permalink Submitted by MICHAEL DOHRING on Thu, 2021-09-30 14:54
My spouses DOB was 11/1950 and it is my intent to convert the funds to my Roth over the next ten years without boosting my income with RMD’s.
Permalink Submitted by Alan - IRA critic on Thu, 2021-09-30 15:53
With 11/1950 DOB, the RBD would have been 4/1/2023 so death was prior to RBD and the 10 year rule can be chosen in lieu of LE RMDs. Your plan should work, with the only risk being that the final Secure Act Regs result in a reversal of the 10 year rule availability stated in the most recent Pub 590 B on p 11.