The Motley Fool Discussion Boards

Previous Page

Retirement Discussions / Retired Fools


Subject:  Re: Traditional IRA to Roth Conversion Date:  12/22/1999  10:31 AM
Author:  TMFPixy Number:  1052 of 20630

Greetings, Raydotfong, and welcome. You wrote:

<<I must be fooled! If in the second scenario the $108,014 is estate taxed, is it at 40%? If it is, then the kids are left with $64,808 with no income taxes to pay, and not the $77,770 listed. This makes it an even trade with the first scenario. Did I make an error somewhere? Thanks for checking>>

And thank you for doublechecking my math. No, you're not fooled, I am. Somewhere I miskeyed an entry. In this stupid example (that's what I get for trying to come up with something uncomplicated) the results will be exactly the same. Thus, this example will not work. Nevertheless, for high net worth individuals, paying taxes on a conversion to a Roth usually benefits the family as a whole due to the interaction of estate taxes on the gross estate, income taxes on inherited traditional IRA, and something called an IRC 691(c) deduction available to the heirs for the inherited IRA. When all of those factors are integrated with the entire estate (i.e., not just the IRA) and because the money used to pay those taxes now is removed from that gross estate, the overall tax burden to the family is lessened. It's a very complicated issue best left for discussion and analysis with a qualified estate attorney. For those with modest estates, it has little applicability.

Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us