Roth Conversion as Estate Planning: Why Your Heirs Inherit Better Money

Most Roth conversion planning focuses on what you save in taxes. But there's a second reason to convert that gets less attention: what you leave behind. Under the SECURE Act's 10-year rule, heirs who inherit a traditional IRA must empty it within a decade — paying ordinary income tax at their rates the entire way. Heirs who inherit a Roth IRA face the same 10-year deadline, but every dollar they take out is tax-free. Converting to Roth at your 22% rate today may save your adult children paying 32–37% later. This guide explains how.

The stretch IRA is gone — what changed with the SECURE Act

Before 2020, non-spouse beneficiaries who inherited an IRA could "stretch" distributions over their own life expectancy — potentially 30 to 40 years for a younger heir. This stretched the tax payments out over decades while the remaining balance grew tax-deferred. For a large IRA, the stretch was enormously valuable.

The SECURE Act of 2019 eliminated the stretch IRA for most beneficiaries who inherit from account owners who die on or after January 1, 2020. Non-spouse beneficiaries who are not "eligible designated beneficiaries" (see below) must now empty the inherited IRA within 10 years of the original owner's death.¹

The T.D. 10001 wrinkle: annual RMDs in the 10-year window

The 10-year rule is more burdensome than it sounds for one category of inheritors. If the original IRA owner had already reached their Required Beginning Date (RBD) — generally April 1 of the year after they turn 73 or 75, depending on birth year² — heirs must take annual required minimum distributions in years 1 through 9 and then deplete whatever remains in year 10.³

This means an heir who inherits from a 74-year-old parent doesn't get to wait until year 10 and then sweep the account. They're required to take distributions every year, calculated using the Single Life Table based on the heir's own age. Missing these annual distributions triggers a 25% excise tax under IRC § 4974.³

For inherited Roth IRAs: The 10-year rule applies, but there is no annual RMD requirement. Heirs can let the account grow tax-free for 9 years and take everything in year 10 — or take it however they like, as long as the account is empty by the 10-year mark. The IRS does not require annual distributions from inherited Roth accounts because the owner had no lifetime RMD obligation.¹

The tax math: inheriting traditional vs. Roth

Consider two siblings, both aged 45, each inheriting a $1 million IRA from a parent who converted to Roth before death. One sibling inherits a traditional IRA; the other inherits a Roth IRA of equal size. Both are high earners, sitting in the 32% federal bracket.⁴

Simplified: assumes single heir at 32% bracket, no state taxes, 7% growth during the 10-year window not modeled.

The heir who inherits the Roth keeps $100,000 more — even after accounting for the $220,000 in conversion taxes already paid by the parent. And this ignores the 10-year Roth growth advantage: a $780,000 Roth growing at 7% for 10 years becomes $1.53 million, all of which the heir withdraws tax-free.

The heirs'-bracket problem compounds with large IRAs

The math gets worse as the IRA grows larger. At $2M and $3M IRA sizes, required distributions can push heirs into the 35% or 37% bracket, even if they wouldn't otherwise be there. A 45-year-old earning $175,000 in salary (28% effective tax territory) suddenly has $200,000 in required IRA distributions on top — placing the marginal distributions in the 35% zone.⁴

The original owner at retirement may have been in the 22% bracket during the conversion window. Their heir at peak earning years is in 32-35%. That spread is the entire rational case for converting now rather than leaving the tax bill to someone else.

Who still gets the stretch (eligible designated beneficiaries)

The SECURE Act's 10-year rule doesn't apply to everyone. Five categories of beneficiaries still qualify for the pre-SECURE stretch distribution schedule:¹

1. Surviving spouse — can roll the inherited IRA into their own IRA, treat it as their own, or take distributions based on their own life expectancy
2. Minor children of the original owner — stretch applies until the child reaches majority, after which the 10-year clock starts
3. Disabled beneficiaries — as defined under IRC § 72(m)(7)
4. Chronically ill beneficiaries — as defined under IRC § 7702B(c)(2)
5. Beneficiaries not more than 10 years younger than the original owner — a sibling inheriting from a sibling, for example

For most people, this means the surviving spouse is protected — and may not benefit from the estate-planning conversion argument. But adult children are the most common heirs of large IRAs, and they are rarely within 10 years of age. For them, the 10-year rule applies fully.

The 5-year rule on inherited Roth earnings

There is one potential wrinkle with inherited Roth IRAs: if the original Roth IRA was funded less than 5 years before the owner's death, the earnings portion of distributions may be subject to ordinary income tax — even to an heir.⁵

For people who started Roth conversions several years ago, this is unlikely to be an issue. The 5-year clock runs from January 1 of the first year a Roth IRA was funded — so someone who opened a Roth in 2020 (even with a small contribution) satisfies the rule for all future conversions into that same account. If you're starting Roth conversions in 2026, the 5-year clock is running and completes January 1, 2031.

Planning note: Beneficiaries do not start a new 5-year clock when they inherit. They inherit the original owner's clock. A Roth IRA opened in 2022 and inherited in 2028 fully satisfies the 5-year rule — earnings are tax-free from day one of inheritance.

How to incorporate estate planning into your conversion strategy

A few practical adjustments for those with legacy goals:

Convert accounts heirs will inherit first. If you have both a rollover IRA from a former employer and a 401(k) with your spouse as beneficiary, prioritize converting the IRA your children will inherit. The spouse-inherited account has more flexibility (surviving spouse can roll into their own IRA); the children's inheritance does not.

Don't let perfect be the enemy of good. Even partial conversions reduce the traditional IRA balance your heirs will face. Converting $100K/year for 5 years at 22% ($110,000 in taxes) that would otherwise generate $150,000+ in taxes at your heir's 35% rate is still a net positive for the family.

Model the full household picture. If your estate is large enough that state inheritance taxes, the federal estate tax, or IRD (income in respect of a decedent) treatment come into play, the calculus becomes more complex. IRD deduction rules (IRC § 691) can partially offset the heir's income tax hit on inherited traditional IRAs — but only for estates large enough to have paid estate tax. A specialist runs both the federal estate analysis and the income tax projections together.

Coordinate with your designated beneficiary form. No amount of Roth conversion strategy matters if your beneficiary designations are outdated. Roth IRAs pass outside the will — the form controls, regardless of what estate documents say. Make sure the right people are listed.