A big part of coming up with an answer are your estate planning goals. For you, doing Roth conversions will mean paying more in income taxes and possibly paying higher Medicare premiums (under IRMAA). But with $1 million plus of invested assets at age 93, Roth conversions will likely not have any impact your ability to fund your lifestyle, or even extraordinary needs, for your remaining years. The choice is whether you’d prefer that your heirs receive IRA assets that don’t come with taxes due, meaning in a Roth IRA, or whether you want your beneficiaries to have to pay the income taxes that come with a pre-tax IRA. Another factor would be how your son’s special needs trust will handle the inheritance and potential income tax liability. The potential income tax there may even be more of a consideration than for your daughter.
Permalink Submitted by Alan - IRA critic on Wed, 2024-04-03 17:23
You cannot make regular Roth contributions without earned income, therefore you would have to first complete your RMD for your TIRA, and then convert an additional amount if you wanted to add to the Roth IRA. You should probably create an SNT (special needs trust) for your son and name it as the beneficiary of your TIRA or Roth IRA. To make things simpler, you might also partition by direct transfer your IRAs, so that the SNT is named as beneficiary for your son’s IRA, and your daughter named directly for the IRAs she will inherit.
For the inherited Roth IRA, the 5 year holding period begins on the first of the year for which your first Roth contribution was made. The inherited Roth IRA becomes totally tax free once 5 years has passed including the year you owned the Roth IRA. For example, if already have a Roth IRA, the 5 years has already started and continues to run after your death. Daughter will inherit under the 10 year rule, so if she does not take a distribution until the 5 years has passed, the entire balance of the inherited Roth will be tax free.