Roth conversions for inherited IRAs/employer plans

[steelyman]

I receive periodic updates by email from Ed Slott’s organization. This one (Aug 2020) has an interesting Q&A regarding the ability of beneficiaries to Roth convert assets. If I’m reading it correctly it says that beneficiaries of an inherited traditional IRA cannot convert to Roth but beneficiaries of an inherited traditional employer plan (e.g., 401(k)) CAN do the conversion. I have one account from my former employer (a 403(b)) but it is already a Roth so not actionable for me but maybe other members...

https://www.irahelp.com/slottreport/rollovers-and-inherited-iras-todays-slott-report-mailbag

 

[gauss]

That sounds familiar. I remember hearing about some privileges that were available with inherited retirement accounts while they are still held at the employer that go away once they are moved to an IRA.


[ We are dealing with this currently. Our issue is that the employer will not release the funds to DW without probate even though she is the beneficiary according to the plan rules in effect on the date of death. ]



-gauss

 

[KarlH]

I inherited an IRA in 2020, and learned that the rules changed with the tax law. In 2020 any inherited IRA must be cashed out by the owner within 10 calendar years, rather than following the basic RMD schedule for traditional IRAs. As such, I don't think that the funds could be converted to Roth, but with the accelerated withdrawal schedule the actual savings over the abbreviated term might prove negligible.