IRA conversion
My father passed away and he had a traditional IRA of which I was a beneficiary. I disclaimed it to my son who was 18 at the time and we were able to take advantage of the stretch.
He has been taking RMDs each year (which are minimal due to his age) from the Inherited IRA and contributing them to a ROTH. My question is, since he is in the very lowest tax bracket now, Can (should) we move some (or all) of the IRA to a ROTH and pay the tax? How do I determine how much to move?
He is single, still in school and the Inherited IRA is now arounf $100,000.
Terry Says
Now that’s an interesting question. And I wouldn’t venture to guess — though I immediately thought that’s a good idea.
Of course, you would need money in his name (or the annual now $19,000 gift tax exclusion, so $38,000 if you and your wife combine the gift money to him) to pay the taxes. You certainly don’t want to take money out of the IRA to pay the taxes.
And I might suggest you run the Roth Optimizer that is part of Larry Kotlikoff’s Maxifi to make sure you’ve covered all the implications of this decision. Read this: https://www.terrysavage.com/roth-conversions-2/
