The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Roth IRA conversion||Date: 12/14/1998 1:19 PM|
|Author: TMFTaxes||Number: 7128 of 120446|
[[I am 75 years old. My wife is 71. I have conventional IRA's totalling about $350000 and my wife
has IRA's of about $140000.I have been taking the minimum required withdrawals for the past
four years. My wife will start this year.My question: Are there any conceivable advantages to either
or both of us converting to a Roth IRA?]]
Conceivable? Perhaps. Apparent? Not necessarily.
The taxes that you would pay on these conversions would be very, very large...larger than you could ever recoup in the form of tax free income in later years.
If you have estate tax problems or considerations, this may be a very valuable option. Dodging the 55% estate tax by getting hit with a 39% income tax might be a good trade off.
Also, if your beneficiaries of theese IRA funds are in higher tax brackets, they'll have to pay high taxes on these IRA funds anyway. So you might as well take the hit now.
And, making the tax payment now may reduce your total estate, and may actually leave more funds available to your beneficiaries.
But this is an estate tax matter that you really need help with. It is a complete package, since the conversion would not necessarily make sense for you alone, but may make sense when viewed in an entire estate planning package.
So I would certainly suggest that you take this matter up with a qualified estate planning pro. In the meantime, you might want to check out the Fairmark tax site (http://www.fairmark.com) where you'll find a more complete dicussion on the issues of the conversion for the elderly and how estate taxes are impacted.
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