Can an Inherited IRA Be Converted?

Beneficiaries have several options when dealing with inherited IRA assets. Spouses may opt to roll over funds into their own IRA and treat them as their own; or take required minimum distributions (RMDs) over their lifetime or that of the deceased account owner’s remaining lifespan.

Non-spouse beneficiaries must take all withdrawals within 10 years or face severe income tax penalties. A financial advisor can help you understand all your options and make an informed decision.

Roth IRAs

Beneficiaries of an Inherited IRA should be mindful of any withdrawals they make from it and their tax ramifications, typically distributions are taxed as ordinary income withholding rates applied against beneficiary withdrawals; if, however, the original account holder was over age 59.5 at time of death and didn’t take required minimum distributions (RMDs), beneficiaries can avoid paying an early withdrawal penalty of 10% by gradually depleting it over a 10-year period.

Another solution is for beneficiaries to roll assets into an Individual Retirement Account (IRA), giving them access to decades of tax-advantaged compound growth. Before making any decisions or taking any steps, beneficiaries should consult with an experienced tax or financial professional specializing in IRAs for guidance and advice. Our low prices for expert financial advice make signing up now the right move! Sign Up Today

Traditional IRAs

Traditional IRAs allow people to save for retirement tax-free while they remain invested within an account, providing tax relief on earnings while your savings remain within it. Contributions may qualify for tax deduction if your income meets minimum contribution thresholds; once it comes time to withdraw funds in retirement however, those earnings become subject to ordinary income tax rates.

After an IRA owner dies, their beneficiaries can choose to convert the accounts into Roth IRAs. While income taxes would still apply on pre-tax contributions and tax-deferred earnings transferred over to these new accounts, withdrawals will no longer incur penalties once age 59 1/2 is reached.

Converting IRA assets to Roth may not be for everyone, but it can be an invaluable asset in retirement and estate planning. Before making any conversions, be sure to discuss them with an advisor, starting with your workplace plan as an avenue.


Rollover refers to when someone transfers retirement assets from one account to another, usually when changing jobs and moving the money from their former employer’s retirement plan into an Individual Retirement Account (IRA). To facilitate the transaction, the 401(k) plan administrator closes down their old account before sending a check for its balance to their new IRA custodian.

Non-spousal heirs who inherit Traditional IRAs must deplete them within 10 years, potentially leading to significant tax liabilities during years with high income levels.

One way heirs may avoid this tax obligation is to transfer their inheritances into a Roth account, where funds can continue growing tax-free over decades.

As a general rule, IRA assets can only be rolled over once every 12 months; however, recent IRS guidance has waived this rule for inherited IRAs.


Recent tax changes mean inherited IRAs must now follow different withdrawal rules for withdrawals. Beneficiaries who don’t qualify as spouses of deceased account owners must use the 10-year rule for distributions starting with their RMD in the year following death; other eligible beneficiaries can stretch withdrawals over their life expectancies if necessary.

Inherited IRAs are still subject to tax at their beneficiary’s ordinary income rate and withdrawal penalties apply – including those for early withdrawals before age 59 1/2.

To gain clarity into how rules pertain to your situation, speak with a financial advisor. SmartAsset’s free tool connects you with pre-vetted advisors near your location who can answer any of your queries free of charge – start your conversation now.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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