Roth conversions can help your heirs save on taxes by moving money out of a pre-tax IRA and into a Roth, where you pay the income tax now at your rate instead of leaving that bill for your heirs to pay later at theirs. They inherit an account that grows and pays out free of income tax.
In the short above, Austin explains why the tax rate on inherited retirement money often matters more than the balance itself. A traditional IRA passes its tax bill to your heirs, while a Roth passes the money with the tax already settled.
What is a Roth conversion?
A Roth conversion moves money from a pre-tax account, such as a traditional IRA or 401(k), into a Roth IRA. You report the converted amount as income and pay tax on it in the year you convert. In exchange, that money grows tax-free from then on and comes out tax-free for both you and the people who inherit it.
Nothing about the conversion changes how much you own. You are not adding to savings or withdrawing to spend. You are changing the tax character of dollars you already have, trading a known tax bill today for the removal of an unknown one later.
How do Roth conversions help your heirs save on taxes?
The benefit comes down to whose tax rate applies. Inherited retirement accounts are taxed based on the type of account, and the difference can be large.
When your heirs inherit a traditional IRA, every dollar they withdraw counts as ordinary income to them. When they inherit a Roth, those same withdrawals generally arrive with no income tax at all, because you already paid the tax through the conversion. By converting, you shift the tax from your heirs' rate to your own.
That shift helps most when your rate is lower than theirs will be. Many people retire with several lower-income years before Social Security and required distributions begin, and those years can be a window to convert at a modest cost. If your heirs are working professionals in their peak earning years, they may inherit during their most expensive tax seasons, and a tax-free Roth spares them that strain.
Why the ten-year rule changes the math
The case for conversions grew stronger after the rules for inherited IRAs changed. Under current law, most non-spouse heirs can no longer stretch withdrawals across their lifetime.
Instead, they generally must empty an inherited IRA within ten years of the owner's death. With a traditional IRA, that compresses years of taxable withdrawals into a short window, often landing in the heir's highest-earning decade and pushing them into a higher bracket. An inherited Roth still must be emptied within ten years, but those withdrawals are generally tax-free, so the ten-year clock loses most of its sting.
This is why the type of account you leave behind matters as much as the amount. Sorting your savings into pre-tax, taxable, and Roth buckets is a core part of retirement planning, and it shapes how efficiently your wealth reaches the next generation.
Who are Roth conversions a good fit for?
Conversions are not right for everyone, and converting too much in one year can cost more than it saves. They tend to fit well in these situations:
- You have lower-income years in early retirement, before Social Security or required distributions begin.
- Your heirs are high earners who would inherit during expensive tax years.
- You can pay the conversion tax with money outside the IRA, so the full balance keeps growing.
- You expect tax rates, yours or your heirs', to be higher in the future than they are today.
Here is a simple comparison of what your heirs face with each type of account:
| What you leave | How heirs are taxed | Ten-year rule impact |
|---|---|---|
| Traditional IRA | Withdrawals taxed as income | Bunches taxable income into ten years |
| Roth IRA | Withdrawals generally tax-free | Ten years to withdraw, little tax cost |
| Taxable brokerage | Often receives a step-up in basis | Not subject to the ten-year rule |
The right answer depends on your full picture, not any single account. A conversion that looks attractive in isolation can fall apart if it raises your Medicare premiums or pushes you into a higher bracket the same year.
What are the risks of converting too much?
A conversion adds to your taxable income, and that ripple reaches beyond your income tax bill. A large conversion can move you into a higher bracket, increase the share of your Social Security that is taxed, and raise your Medicare Part B and Part D premiums through the income-related surcharge known as IRMAA.
None of this means conversions are a bad idea. It means size and timing deserve real attention. Spreading conversions across several lower-income years, rather than converting a large balance at once, often keeps you under the thresholds that trigger these extra costs while still moving meaningful amounts to a Roth.
This is where having a CPA on staff changes the conversation. Our firm coordinates the investment decision and the tax decision together, so a conversion meant to help your heirs does not quietly create a new bill for you. You can see how we approach that coordination on our financial planning page, and how conversions fit a broader wealth transfer plan through estate planning.
How conversions fit your wider plan
Roth conversions rarely stand alone. They work alongside the step-up in basis on appreciated assets, lifetime gifting, and the way your accounts are titled. A thoughtful plan looks at all of these together and decides how much to convert, in which years, and at what tax cost.
If leaving a tax-efficient legacy matters to you, the next step is a conversation about your specific accounts and brackets. Talk with our team and we will review where your money sits today and whether converting part of it could ease the tax burden your heirs would otherwise inherit.
This article is educational and is not personalized investment, tax, or legal advice. Wealth Ease Wealth Management is a registered investment adviser; consult a qualified professional about your specific situation.
Frequently asked questions
How do Roth conversions help your heirs save on taxes?
A Roth conversion moves money from a pre-tax IRA into a Roth, where you pay income tax now instead of leaving that bill to your heirs. They inherit a Roth that grows and pays out free of income tax, which helps when they would otherwise withdraw in higher brackets.
Do heirs pay taxes on an inherited Roth IRA?
Qualified withdrawals from an inherited Roth IRA are generally free of income tax, because the original owner already paid tax through the conversion. Most non-spouse heirs must empty the account within ten years, but those withdrawals usually arrive without an income tax bill attached.
What is the ten-year rule for inherited IRAs?
Under current rules, most non-spouse heirs must fully withdraw an inherited IRA within ten years of the owner's death. With a traditional IRA those withdrawals are taxable income. With an inherited Roth, the ten-year window still applies but the withdrawals are generally tax-free.
When is the best time to do a Roth conversion?
Conversions often make the most sense in lower-income years, such as early retirement before Social Security and required distributions begin. Converting when your bracket is low, and lower than your heirs expect to face, lets you move money to a Roth at a smaller tax cost.
Will a Roth conversion raise my Medicare premiums?
It can. A conversion adds to your taxable income for the year, and higher income can raise Medicare Part B and Part D premiums through IRMAA. Sizing each conversion carefully, often across several years, helps keep these surcharges in check while still moving money to a Roth.