Should I ask my mom to convert her IRA into a roth IRA?

Question

My mom is very healthy at 70. I've been managing her IRA for many years. In the meantime, I've been providing for her living expenses so she wouldn't need to tap into the IRA. We've been making mandatory withdrawls and saving that in a separate account. Recently, she mentioned to me that she might leave her IRA to me in her will.

That brings up this issue. If I have a choice, what is the best way to inherit money? I could ask my mom to withdraw the IRA money gradually over the next 15-20 years (she comes from a long-lived family) and possibly give me the money as cash. I could leave things alone and possibly inherit the traditional IRA. Or, I could ask her to convert the traditional IRA into a roth IRA. Any suggestions?

Answer 1

Depends on your age and retirement savings already. It's good to have taxable and non-taxable money during retirement because then you can withdraw from whichever to best suit your tax goals for each year.

Also, they've changed the rules about beneficiaries having to take a traditional IRA as a lump sum and you can now inherit as is and continue to watch it grow without paying taxes immediately.

There is a cap on "gifts" to people and if she gives it to you in cash, depending on how much it is, it potentially will cause taxes later with the rest of the estate.

Besides, she can't leave it to you in her will. She has to fill out the beneficiary form with the IRA holder which supercedes any will.

It is your mom's money to do with as she wishes. Not for you to encourage her to withdraw over the next however years just to benefit you. She needs to do with it what will benefit herself and you can be happy that she's got something for you to inherit.

Answer 2

She will need to start withdrawing soon from this IRA legally under the IRS rules. Have her take out the MAX and simply give it to you. Keep this gift at $10,000 annually and you will have NO tax consequence. Parents can give each of their children $10,000 annually with no troubles.

If she rolls this over SHE WILL have tax consequence since a ROTH is handled differently than other IRA's

Answer 3

i wouldnt worry at all about how this affects you, this has to be for your mom first, and she is healthy and expected to live a long time, why have her start taking money out to give to you, what happens if she gives it all away and is 95 years old with no money?

let it play out and inherit what is left, besides, if you roll it to a roth you pay all the taxes on it right now, may as well put it off