Overview: How Roth IRA Conversions Fit Into Estate Planning

A Roth IRA conversion estate planning involves moving assets from a traditional IRA or 401 k into a Roth IRA. When you convert, the amount transferred is treated as ordinary income in the year of conversion, which means you pay income taxes upfront. In exchange, qualified withdrawals from the Roth IRA are generally tax free under current law, provided certain conditions are met.

Estate planning with Roth IRAs has gained attention in recent years, particularly after the SECURE Act (2019) and SECURE 2.0 (2022) changed the rules for inherited IRAs. One of the most significant changes is the 10-year payout rule, which requires most non-spouse beneficiaries to fully distribute inherited retirement accounts within a decade of the original owner’s death. This compressed timeline has prompted many families to reconsider how they structure retirement savings for the next generation.

This article provides general education about Roth IRA conversions in an estate planning context. Outcomes vary considerably based on factors such as your current tax bracket, age, the financial situation of your heirs, and state and local taxes. Nothing here constitutes individualized advice, and readers are encouraged to consult with qualified professionals before making financial decisions.

In the sections that follow, we will cover:

• The tax characteristics of Roth IRAs in an estate context
• Why conversions are often considered as part of wealth planning
• How the 10-year rule affects inherited Roth IRAs
• Planning around the 2025–2026 estate tax exemption changes
• Strategies for different heir types, including spouses, adult children, and charities
• Coordination with other tools like trusts and 529 plans
• Special considerations around market conditions and legislative risk

Roth IRA Basics in an Estate Planning Context

Roth IRAs are retirement accounts funded with after-tax dollars. Unlike traditional IRAs, which offer a tax deduction on contributions but tax withdrawals as ordinary income, Roth accounts flip the equation. You pay taxes now, and qualified distributions later are currently income tax free.

For a distribution to be qualified, the Roth IRA must generally have been open for at least five tax years, and one of the following must apply:

• The owner is age 59½ or older
• The owner is disabled
• The owner has died (distributions to beneficiaries)
• The distribution is for a first-time home purchase (up to certain limits)

One characteristic that makes Roth IRAs particularly useful for estate planning is that owners are not required to take required minimum distributions RMDs during their lifetime under current federal rules. This means you can leave assets in a Roth account to grow tax free for as long as you live, potentially leaving a larger balance to your heirs.

A Roth IRA conversion involves shifting pre-tax assets from a traditional IRA or similar tax deferred accounts into a Roth IRA. The converted amount is included in your taxable income for that year as ordinary income. You then pay taxes on the conversion, and the assets become part of your Roth balance going forward.

A few key points to keep in mind:

• State tax treatment varies. Some states tax Roth conversions as ordinary income, while others have no income tax at all. Consulting a tax professional about your specific jurisdiction is generally advisable.
• Estate inclusion. Even though future withdrawals from a Roth IRA may be income tax free to your beneficiaries, the account balance is still included in your gross estate for federal estate tax purposes.

Why Roth IRA Conversions Are Often Considered for Estate Planning

Roth IRA conversions are sometimes used as part of a broader strategy to shift the income tax burden from heirs to the original account owner. The idea is relatively straightforward: by paying income taxes now at your current tax rate, you may reduce the future taxable income your heirs would otherwise recognize when they inherit and withdraw from a traditional IRA.

This concept is often described as “prepaying” the tax. Under the SECURE Act’s 10-year distribution rule, most non-spouse beneficiaries must empty an inherited IRA within a decade. For a traditional IRA, that means potentially large taxable withdrawals compressed into a shorter timeframe. For heirs already in a higher tax bracket, this could result in a significant tax liability.

Many families consider spreading conversions over multiple years rather than converting a large amount all at once. By managing how much you convert each tax year, you may be able to stay within targeted tax brackets and avoid pushing yourself into higher ordinary income tax rates.

Roth accounts can also provide flexibility to heirs. Because qualified withdrawals are generally not taxed as income under current law, beneficiaries can make decisions about when to withdraw money without worrying as much about the income tax impact.

Consider this high-level comparison:

Scenario	$1 Million Traditional IRA	$1 Million Roth IRA
Income tax to heir	Taxable as ordinary income when withdrawn	Generally tax free if qualified
10-year rule	Must distribute within 10 years	Must distribute within 10 years
Heir’s flexibility	Timing affects tax liability	Timing is more flexible

Conversions typically require using liquid funds to pay the conversion tax. Many advisors suggest paying this tax from taxable accounts rather than from the retirement account itself. This approach keeps the full converted amount invested inside the Roth while also reducing the size of your taxable estate by the amount of the tax paid.

SECURE Act, 10-Year Rule, and Inherited Roth IRAs

The SECURE Act, effective in 2020, fundamentally changed how many inherited retirement accounts must be distributed. Before this legislation, many non-spouse beneficiaries could stretch required distributions over their own life expectancy, allowing for decades of tax deferred or tax free growth. This “stretch IRA” strategy is now largely unavailable for most heirs.

Under the current 10-year distribution rule, most non-spouse beneficiaries must fully distribute inherited IRAs—both traditional and Roth—by December 31 of the 10th year following the original owner’s death. This applies to deaths occurring after 2019.

For inherited Roth IRAs specifically:

• Non-spouse beneficiaries generally do not face annual required minimum distributions during the 10-year period under current IRS guidance
• The account must be fully emptied by the end of year 10
• Growth during that decade remains tax free if qualified distribution rules are met
• Withdrawals themselves are generally income tax free

Compare this to inheriting a traditional IRA, where every withdrawal is taxable as ordinary income. A beneficiary who inherits a $500,000 traditional IRA and must distribute it over 10 years could face $50,000 or more in additional taxable income each year, potentially pushing them into a higher tax bracket.

There are exceptions. Certain “eligible designated beneficiaries” may still use life-expectancy payouts rather than the 10-year rule:

• Surviving spouses
• Minor children of the decedent (until they reach a certain age)
• Disabled or chronically ill individuals
• Beneficiaries not more than 10 years younger than the decedent

Illustrative scenario: Suppose a non-spouse child inherits a Roth IRA in 2026. Under current rules, they could potentially leave the funds invested for the full 10 years, allowing tax free growth, and then withdraw the entire balance by the end of 2036. The growth during that period would not be subject to federal income tax. This is an example only and not a recommendation for any specific situation.

Roth Conversions and Estate Tax Thresholds Around 2025–2026

Federal estate tax thresholds are scheduled to change significantly in 2026, which is why this period often comes up in estate planning discussions. Under current law, provisions from the 2017 Tax Cuts and Jobs Act are set to sunset on January 1, 2026.

Here are the current figures to keep in mind:

Year	Federal Estate Tax Exemption (Individual)	Federal Estate Tax Exemption (Married Couple)
2025	$13.61 million	$27.22 million
2026 (projected if sunset occurs)	Approximately $6-7 million	Approximately $12-14 million

For estates well below these thresholds, federal estate tax may not be a primary concern. In those cases, income-tax-focused strategies like Roth conversions often take center stage in wealth planning discussions.

For larger estates, the math becomes more complex. When you pay income taxes on a Roth conversion using assets from outside the retirement account, you are effectively removing those dollars from your taxable estate. The taxes you pay are no longer subject to estate tax, while the Roth balance—now potentially larger due to tax free growth—remains in the estate.

State considerations also matter:

• Some states have estate tax exemption thresholds much lower than federal levels (in the $1 million–$3 million range in some jurisdictions)
• State inheritance taxes may apply regardless of federal estate tax exposure
• State and local taxes on conversions can affect the overall efficiency of the strategy

Legislative changes are frequent in this area. Any conversion strategy benefits from periodic reviews with qualified professionals to account for updated tax laws and regulations.

Comparing Heir Types: Spouses, Adult Children, and Charities

The “best” assets to leave to each type of heir often vary based on their tax situation, needs, and your overall estate planning goals. Here is how Roth conversions may fit into different scenarios.

Spousal Heirs

Surviving spouses have the most flexibility when inheriting IRAs:

• They can generally treat an inherited IRA (traditional or Roth) as their own
• They may roll inherited accounts into their own IRAs
• They can continue tax advantaged growth without the 10-year rule
• They may name new beneficiaries

For a surviving spouse who wishes to limit future required minimum distributions and preserve assets for the next generation, a Roth balance can be particularly useful. The spouse is not forced to take RMDs during their lifetime, allowing the account to continue growing tax free.

Adult Children and Other Non-Spouse Heirs

Adult children and other non-spouse beneficiaries face the 10-year rule under current law. For heirs already in a higher tax bracket, inheriting a large traditional IRA could mean substantial income tax bills over the distribution period.

Inheriting Roth IRA assets instead may mitigate that income tax burden, since qualified distributions are generally tax free. This can be especially relevant for heirs with high-earning careers who might otherwise be pushed into even higher marginal tax rates by inherited IRA withdrawals.

Charitable Beneficiaries

Qualified charities generally do not pay income tax on distributions they receive. This makes traditional IRA assets potentially more efficient to leave to charity than to individual heirs:

• The charity receives the full amount without income tax
• Individual heirs could instead receive Roth or other after-tax assets
• Leaving traditional IRA assets to charity avoids the income tax that would otherwise be due

It is worth noting that qualified charitable distributions from IRAs are currently permitted starting at age 70½ under current rules. QCDs allow you to transfer funds directly from a pre-tax IRA to a qualified charity, which can reduce your taxable income and potentially satisfy required minimum distributions. QCDs are not available from Roth IRAs.

Many families consider a strategy of leaving pre-tax retirement accounts to charities while directing Roth accounts or taxable accounts to individual heirs. This approach depends on each family’s legacy goals, tax situation, and philanthropic plans.

Practical Roth Conversion Design: Timing, Amounts, and Triggers

Conversion timing and amounts are often tailored to individual tax brackets, cash flow, and estate objectives rather than following a single rule of thumb. The goal is usually to pay taxes at a manageable rate while maximizing the long-term benefit of tax free growth.

Tax Bracket Management

One approach sometimes discussed is “filling up” certain tax brackets. For example, if your taxable income in a given year would normally fall within the 22% federal bracket, you might convert enough traditional IRA assets to reach the top of that bracket without spilling into the 24% bracket. This is not a recommendation for any specific situation, but it illustrates how some investors think about managing the tax impact of conversions.

Common Timing Windows

Several timing windows are often evaluated for Roth conversions:

• Years between retirement and the start of Social Security or pensions. During this gap, your taxable income may be lower than it will be once you begin receiving retirement income from other sources.
• Years before RMDs begin. Under current rules, required minimum distributions from traditional IRAs start at age 73. Converting before RMDs begin can reduce your future RMD base.
• Years with unusual deductions or losses. If you have a year with significant business losses, medical expenses, or other deductions, your taxable income may be lower, making conversions potentially more tax efficient.

Paying the Tax

Having outside funds available to pay the income tax on conversions is often considered important. If you pay the tax from taxable accounts rather than withdrawing from the IRA itself, the full converted amount can remain invested inside the Roth. This also means you are not reducing your retirement savings to cover the tax bill.

Medicare and Social Security Considerations

Large conversions can increase your adjusted gross income, which may affect:

• Medicare premiums. The Income-Related Monthly Adjustment Amount (IRMAA) can increase Medicare premiums for Part B and Part D if your income exceeds certain thresholds. Since IRMAA is based on income from two years prior, a large conversion in 2025 could affect your premiums in 2027.
• Social Security benefits. Higher income can increase the portion of your social security benefits that are subject to tax.

These factors prompt some investors to consider smaller, staged conversions spread over multiple years rather than a single large conversion.

Illustrative Case Study

Consider a 68-year-old retiree in 2025 with a $2 million traditional IRA and $500,000 in taxable accounts. She plans to delay Social Security until age 70 and does not need to tap her IRA for living expenses. RMDs will begin at age 73.

She might evaluate converting $150,000 to $200,000 per year from 2025 through 2030, staying within the 24% federal bracket each year. By the time RMDs begin, her traditional IRA balance would be lower, reducing future RMDs. Her Roth IRA would have grown, potentially providing tax free withdrawals for herself and her heirs.

This example is illustrative only and does not account for market performance, state taxes, or her specific financial situation. Actual outcomes would depend on many factors.

Coordinating Roth Conversions With Other Estate Planning Tools

Roth IRA conversions work best when integrated into a broader estate plan rather than viewed in isolation. Here are some common coordination points.

Trusts as Beneficiaries

Naming a trust as the beneficiary of a Roth IRA may help address:

• Control over distributions (especially for young or financially inexperienced heirs)
• Spendthrift concerns or creditor protection
• Blended family situations where assets need to be managed carefully

However, using a trust adds complexity. Trust drafting must account for current IRS guidance on “see-through” trusts, and the 10-year distribution rule generally still applies. Improperly drafted trusts can accelerate distribution requirements or create unintended tax consequences.

529 Plans and SECURE 2.0

SECURE 2.0 created a new pathway for rolling over certain 529 plan balances to Roth IRAs under specific conditions:

• The 529 must have been open for at least 15 years
• The rollover is limited to annual Roth IRA contribution limits
• A lifetime cap of $35,000 applies per beneficiary
• The rollover must go to the 529 beneficiary’s Roth IRA

This provision, effective starting in 2026, can complement Roth-focused multigenerational strategies by allowing unused education savings to become retirement savings.

Gifting Strategies

Lifetime gifts from taxable accounts can indirectly support Roth strategies. For example:

• Using the annual gift tax exclusion ($18,000 per recipient in 2026) to transfer taxable wealth to younger generations
• Reducing your taxable estate while preserving retirement accounts for conversion
• Helping heirs build their own savings or pay for expenses

Life Insurance Coordination

Some families coordinate life insurance death benefits with Roth balances to create a diversified mix of assets for heirs:

• Life insurance proceeds are generally income tax free to beneficiaries under current law
• Roth IRA distributions are also generally tax free if qualified
• Together, they can provide both liquidity and long-term tax advantaged assets

Beneficiary Designation Reviews

This is a critical but often overlooked step. Beneficiary designations on IRAs, Roth IRAs, life insurance policies, and transfer-on-death accounts should be:

• Reviewed periodically
• Updated after major life events (marriage, divorce, births, deaths)
• Aligned with your written estate plan and legacy goals

Mismatched beneficiary designations can override your will and create unintended consequences.

Special Considerations: State Taxes, Market Conditions, and Legislative Risk

Roth conversion decisions do not occur in a vacuum. Several external factors can influence whether conversions make sense for a particular situation.

State Income and Estate Taxes

State tax rules vary significantly:

• Some states tax Roth conversions as ordinary income at their state rate
• Some states have no income tax at all
• State estate taxes may apply at thresholds much lower than federal levels
• Some states also impose inheritance taxes on beneficiaries

These factors can affect both the immediate cost of a conversion and the long-term benefit to your heirs.

Market Conditions

Some investors consider conversions during years when account values are temporarily lower due to market declines. The logic is straightforward: converting a lower balance means recognizing less taxable income for the same number of shares or units. If the market subsequently recovers, that growth occurs inside the Roth IRA.

However, investing involves risk, and future results are uncertain. Market timing is not a reliable strategy, and decisions should not be based solely on short-term market movements.

Legislative and Regulatory Changes

Roth-related rules, estate tax thresholds, and IRA distribution requirements have changed multiple times in recent years:

• The 2017 Tax Cuts and Jobs Act raised estate tax exemptions
• The 2019 SECURE Act eliminated the stretch IRA for most beneficiaries
• SECURE 2.0 in 2022 made additional changes to RMD ages and 529 conversions

Future changes are possible, and any strategy based on current tax laws may need adjustment. This is one reason why periodic reviews with a tax advisor and other professionals are often recommended.

Risk Tolerance and Time Horizon

Families with longer time horizons and heirs in high tax brackets may evaluate Roth conversions differently from those who expect to spend most of their retirement assets during their own lifetimes. Questions to consider:

• How much of your retirement savings do you expect to leave to heirs?
• What are your heirs’ likely income and tax situations?
• How comfortable are you paying taxes now for potential future benefits?

Roth conversions are one of several tax efficient strategies available. They are not a one-way bet on future tax rates or legislation.

Coordinating With Advisors and Periodic Reviews

Estate planning with Roth IRA conversions is highly individualized. What works well for one family may not make most sense for another. Coordinated professional input often helps ensure that all pieces of the puzzle fit together.

Professional Roles

Different professionals bring different expertise:

Professional	Typical Role
Tax professional (CPA, Enrolled Agent)	Evaluates tax impact of conversions, helps with bracket planning, prepares returns
Estate planning attorney	Drafts wills, trusts, and powers of attorney; ensures legal documents align with goals
Financial planner	Develops long-term projections, coordinates retirement plans with estate objectives

Review Milestones

Consider reviewing your Roth strategy at key points:

• Approaching age 59½ (penalty free withdrawals from Roth IRAs become available)
• Approaching age 70 (QCDs become available from pre-tax IRAs)
• Age 73 (RMD age under current law)
• After major life events: marriage, divorce, birth of a child or grandchild, death of a spouse, sale of a business

Documentation

Maintaining organized records supports clearer analysis and decision-making:

• Tax returns from conversion years
• IRA and Roth IRA statements
• Records of prior conversions and basis tracking
• Estate documents (wills, trusts, beneficiary designations, powers of attorney)

Online Tools

Many financial institutions and tax software providers offer calculators and estimators that can illustrate potential outcomes and tradeoffs. These tools can be helpful for understanding concepts, but they do not replace individualized planning with qualified professionals who understand your complete financial situation.

If you are considering Roth IRA conversions as part of your estate planning goals, exploring additional resources and speaking with a tax professional, estate planning attorney, and financial planner is a reasonable next step. These conversations can help you plan ahead and make decisions that align with your family’s unique circumstances.

Important Disclosures

This article is for educational and informational purposes only and is not intended as investment, tax, or legal advice.

The strategies discussed, including Roth IRA conversions and estate planning techniques, may not be appropriate for every investor or family. Suitability depends on individual circumstances, including your income, tax situation, retirement plans, and legacy goals.

Please keep in mind:

• Investing involves risk, including the possible loss of principal
• Tax laws and regulations can change, potentially altering the impact of any strategy
• Examples and scenarios presented are hypothetical and designed to illustrate concepts, not to predict future results or recommend specific actions
• No outcomes, tax savings, or investment returns are guaranteed
• Any projections or references to future conditions are inherently uncertain

Readers should consult with qualified tax professionals, legal counsel, and financial advisors before making decisions about Roth conversions, beneficiary designations, or estate planning structures. Third party providers mentioned in this article are not affiliated with or endorsed by the author.