Life and Death Planning for Retirement Benefits

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Chapter 4: Inherited Benefits: Advising Executors and Beneficiaries 193
because the IRS’s regulation on Roth IRA conversions says that any transfer from a traditional
IRA to a Roth IRA will be treated as (and must meet the requirements for) a rollover, even if the
“conversion” is accomplished by an IRA-to-IRA transfer or even just by “redesignating” the
account as a Roth. Reg. A-1(a), (c).
B. Code allows Roth conversions from other inherited plans. The definition of qualified
rollover contribution (to a Roth IRA) in includes a rollover from a qualified
retirement plan (QRP) if the rollover meets the requirements of Unlike the
provision defining qualified rollovers from an IRA see “A” above),
does not prohibit rollovers of inherited plans. Accordingly, a Designated Beneficiary who
is entitled to a direct rollover of inherited QRP benefits (see can require the QRP
to transfer the benefits into either an inherited traditional IRA or an inherited Roth IRA.
Notice 2008-30, 2008-12 IRB 638, A-7.
Qualified rollover contribution as defined in also includes a rollover from a
403(a) or (b) plan if it meets the requirements of and a rollover from a governmental
457(b) plan if it meets the requirements of Since and
incorporate and nonspouse beneficiary Roth conversions are permitted
for inherited 403 plans and governmental 457 plans in the same manner as for inherited QRPs.
C. Nonspouse beneficiary Roth conversions: Various matters. A Designated Beneficiary
who converts an inherited nonIRA plan to an inherited Roth IRA has the same option other
Roth converters have to defer income on a 2010 conversion into 2011–2012 (see ;
does not except beneficiary conversions. He also has the same ability
as other Roth converters to “recharacterize” (undo; see that conversion by
transferring the contribution and earnings thereon to a traditional inherited IRA. Notice
2008-30, A-7. However, once he recharacterizes he can never “reconvert”
because he can’t convert an inherited IRA (see “A”).
The minimum distribution rules apply to a beneficiary Roth conversion in the same manner
as for other nonspouse beneficiary rollovers; see I).
Computation of the Five-Year Period B)) for a beneficiary Roth conversion is
unclear. For a Roth IRA that the beneficiary inherits from the deceased participant, we know the
participant’s holding period “carries over” to the beneficiary; see B). Does this same
“carryover” rule also apply to an “inherited” Roth IRA created by the beneficiary in connection
with a nonspouse beneficiary Roth conversion, i.e., if the decedent had already completed his Five-
Year Period with respect to his own Roth IRAs, do the beneficiaries get the benefit of that for an
“inherited” Roth IRA they created? There is no IRS guidance on this.
Even if the beneficiary wants, and can afford, a Roth conversion, he will get much more
value by converting his own plans or IRAs to a Roth IRA than by converting an inherited plan to
an inherited Roth IRA, if the cost is the same. “His own” Roth IRA would have no RMDs during
his lifetime A)), and could be left to his surviving spouse for a spousal rollover
or to another Designated Beneficiary for a stretch payout (¶ 1.5.05), after his death. In contrast, an
inherited Roth IRA would have to be distributed, starting the year after the year of the participant’s
death, over the beneficiary’s single life expectancy (with no possibility of flipping to a more
extended payout after his death). C),