Can a Non-Spouse Beneficiary Convert an Inherited IRA to a Roth IRA?

Thursday, April 23, 2015

By Joe Cicchinelli and Beverly DeVeny
Follow Us on Twitter: @theslottreport

Can a non-spouse beneficiary convert an inherited IRA to a Roth IRA? What is the proper designation for an IRA trust beneficiary? These questions and more are answered in this week’s Slott Report Mailbag, proudly sponsored by Goldco Precious Metals. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.

1.

Hi Ed Slott and Company,

I read The Slott Report religiously every day and find it to be immensely informative and helpful.

I had an interesting question come up today from a beneficiary who has inherited an IRA from her Dad and will be rolling in over into a Beneficiary IRA. Is there a way she can roll it over, pay the taxes and then convert it into a Roth IRA? I have a feeling the answer is No, but I wanted to make sure.

Answer:
As a non-spouse beneficiary of an IRA, she is not allowed to convert any part of the inherited IRA to a Roth IRA. Also, as a non-spouse beneficiary, she cannot do a 60-day rollover of the funds into a beneficiary IRA, but must instead directly transfer the funds to the beneficiary IRA.

2.

Can a person who is 72 years old take an RMD (required minimum distribution) from their traditional IRA then use that money to fund a Roth IRA?

They have no other earned income and they do not need the RMD money to live.

Answer:
No, because he has no compensation on which to make a Roth IRA contribution. An individual must have compensation from working at a job and not exceed the income requirements for contributing to a Roth IRA. IRA distributions are not considered compensation. You can read more on IRA contributions here.

 

3.

Could you please let me know the answer to this question? What is the proper designation of an IRA when the beneficiary is a trust?

Many thanks,
Marcel Frenkel

Answer:
You simply name the trust as the beneficiary on the IRA beneficiary form provided by the IRA custodian. Instead of saying Jane Jones is the beneficiary, you say the Jane Jones Trust is the beneficiary.

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This week’s Slott Report Mailbag is sponsored by:
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