One of the most common things I hear in a Roth conversion conversation is, “I don’t want to pay the tax until I have to.”

That sounds conservative. Why create a tax bill today when you could leave the money invested?

But for families with more retirement money than they’re likely to spend, delaying the tax doesn’t avoid it. It moves it. Off the parents’ return, onto the children’s.

Your kids may inherit that account in their forties or fifties, in the highest-earning years of their careers. So the dollars you declined to convert at a 22 percent marginal rate could come out later while they’re paying 32 percent or more.

The family pays the tax either way.

The only real question is whether you decide whose return the income lands on, or whether you let that get decided for you.

A Traditional IRA Is More Than an Investment Account

A traditional IRA isn’t just an investment account. It’s an investment account with a deferred tax liability attached.

The balance on the statement isn’t the amount your family gets to spend.

If the account holds mostly deductible contributions and tax-deferred growth, distributions are generally taxable income. During your lifetime, required minimum distributions eventually force some of that income onto your return. If you die with money still in the account, your beneficiaries inherit the assets and the tax obligation that rides along with them.[1]

There are exceptions worth knowing. Part of an IRA may represent after-tax basis. A qualifying charity can generally receive the account without paying the income tax an individual beneficiary would owe. A surviving spouse has options an adult child doesn’t.[1]

But when a parent leaves a largely pretax IRA to adult children, the tax liability doesn’t disappear.

It changes taxpayers.

The SECURE Act Compressed the Window

Before the SECURE Act, many non-spouse beneficiaries could stretch inherited IRA distributions over their life expectancy. Depending on the beneficiary’s age, that could spread the taxable income across decades.

For most adult children today, that’s gone.

Most adult children are designated beneficiaries, but not “eligible designated beneficiaries.” They generally have to empty the inherited IRA by December 31 of the year containing the tenth anniversary of the owner’s death.[1][3]

The main exceptions are a surviving spouse, the owner’s minor child, a disabled or chronically ill beneficiary, and someone who isn’t more than ten years younger than the account owner.[1]

What happens inside those ten years depends on when the owner died.

If the owner died before the required beginning date for minimum distributions, the beneficiary generally doesn’t have to take annual distributions in years one through nine. The account still has to be empty by the end of year ten.[1][3]

If the owner died on or after the required beginning date, the beneficiary generally has to keep taking annual required distributions during the ten-year period, and still empty the account by the end of year ten.[1][3]

Either way, the window is a lot shorter than most families expect.

Your Children May Inherit the IRA at the Worst Possible Time

The problem with the ten-year rule isn’t that ten years is short.

It’s which ten years they turn out to be.

Your children might inherit this account while they’re earning peak salaries, taking bonuses, exercising options, selling company stock, running a business, or writing tuition checks for your grandchildren.

Then, on top of all of that, they have to empty an inherited IRA.

Those distributions can push part of the account into a higher federal bracket. They can also reach state income taxes, deductions, credits, and capital-gain rates.

That’s why I don’t evaluate a conversion by asking only, “How much tax would you pay this year?”

I ask a different question. Which family member is most likely to report these dollars as income, in which years, and at what incremental rate?

That turns a one-year tax calculation into a multigenerational planning decision.

Consider a 74-Year-Old Widow With a $1.4 Million IRA

Say a 74-year-old widow has $1.4 million in a traditional IRA.

She’s already taking required minimum distributions. After her other income and deductions, additional taxable income still falls in the 22 percent federal bracket.

She passes on Roth conversions. Her tax bill already feels high enough, and paying more on purpose doesn’t seem necessary.

Now say she dies several years later and leaves the remaining IRA equally to her two adult children.

Both are in their late forties. Both are already earning well. Once the inherited distributions stack on top of their existing income, assume those incremental dollars land in the 32 percent bracket.

For illustration, each child inherits $700,000 and takes $70,000 a year over ten years. Before any growth, the family recognizes $1.4 million of inherited IRA income during that period.

At an assumed 32 percent marginal rate, that’s roughly $448,000 of federal income tax.

Apply an assumed 22 percent rate to the same $1.4 million and you get roughly $308,000.

A simplified difference of $140,000.

The family pays the tax either way. It just paid ten points more, and nobody chose it.

One qualification matters here. This doesn’t mean the widow could have converted the whole $1.4 million at 22 percent. A conversion that size would cross several brackets. Federal brackets also apply in layers, so not every dollar a beneficiary withdraws is taxed at their top rate. The illustration compares two incremental rates on the same dollars. It isn’t a forecast.

The real opportunity would have been a series of partial conversions over several years. Some might happen after retirement but before required distributions begin. Others could happen after RMDs start, as long as the required distribution comes out first, because an RMD itself can’t be converted to a Roth IRA.[4]

So the credible question was never whether she could convert everything at 22 percent.

It’s how much of the account she could move over time at a lower family tax rate than her children may eventually pay.

What I’d Actually Model

A useful conversion analysis has to do more than compare today’s bracket against a child’s assumed future bracket.

In our planning process, I want to see at least five scenarios.

1. The parent’s tax bill with no conversions.

We need a baseline first. That means projecting IRA growth, required distributions, Social Security, pensions, deductions, filing status, and other taxable income.

Without it, we don’t know whether the IRA is likely to shrink, hold steady, or keep growing even while distributions come out. In a lot of cases it keeps growing, and that surprises people.

2. A series of partial conversions.

Then we model several amounts instead of an all-or-nothing decision. We might compare converting enough to stay inside a target bracket against pushing into the next rate on purpose.

The goal isn’t to minimize this year’s tax bill. It’s to find out whether paying more now lowers the family’s projected lifetime tax cost.

This is also where we settle how the conversion tax gets paid. Outside assets or withholding from the IRA. Paying from the IRA leaves fewer dollars inside the Roth and can shrink the benefit you’re converting to capture.

3. The surviving spouse.

For married couples, the children usually aren’t the first tax problem. The first problem shows up when one spouse dies.

The survivor may keep most of the same income and file as a single taxpayer, which means reaching higher brackets on less income.

Conversions can protect the spouse who lives longer, not just the next generation.

4. The beneficiaries’ likely tax range.

Nobody knows what your children will earn twenty years from now. No projection fixes that.

We can still make reasonable estimates. Are they early in high-income careers? Do they own businesses? Might they retire before they inherit? Does one live in a high-tax state while the other lives somewhere with no income tax?

We aren’t trying to predict their returns. We’re trying to see whether there’s a meaningful chance they pay a higher incremental rate than you could pay today.

5. Where the IRA is actually headed.

Finally, who’s getting this account?

If it’s going to charity, a conversion is usually less attractive, since a qualifying charity can generally receive traditional IRA assets without the income tax an individual beneficiary would owe. Someone already making qualified charitable distributions may be shrinking the IRA and meeting charitable goals at the same time.

If it’s headed to high-earning children, the beneficiary tax cost deserves more weight.

A Roth IRA Changes the Character of the Inheritance

Converting doesn’t get your children out of the ten-year rule. They’ll still generally need to empty an inherited Roth by the end of the tenth year.[1]

Two things change, though.

Qualified Roth distributions can generally come out free of federal income tax.[5] A child can take a large withdrawal without adding the same amount to taxable income, so it doesn’t push wages, bonuses, business income, or capital gains into higher brackets.

And because a Roth owner is never treated as dying after a required beginning date, an inherited Roth generally doesn’t carry the annual distribution requirement that an inherited traditional IRA can.[1] That’s the mechanism behind the flexibility. Your child can leave the account invested and take it near the end of the ten years, on their own timing.

The five-year rule still matters. Death is itself a qualifying event, so for a beneficiary the holding period is the remaining hurdle. If the applicable five-tax-year period has been satisfied, distributions after the owner’s death are generally qualified. If it hasn’t, earnings distributed from the inherited Roth can still be taxable until that period is complete.[1][5]

Which is one more reason this planning works better when it starts years before the account is expected to change hands.

When a Conversion Isn’t the Answer

A credible analysis has to say when the answer is no.

Conversions get less compelling when your children are likely to be in lower brackets than you are, or when most of the IRA is headed to charity. They get less compelling when the tax would trigger a Medicare premium increase you aren’t willing to absorb, when you’re planning to move from a high-tax state to a low-tax one, or when paying the bill would cut into liquidity you actually need. If you’d have to use a large slice of the IRA itself to cover the tax, that’s a warning sign too. Substantial after-tax basis inside the account changes the math. So does having other deductions or charitable strategies that could reduce future IRA income more efficiently.

Tax rates change. So do account values, spending needs, beneficiaries, and estate plans.

So a conversion projection isn’t a one-time answer. It’s a document you update as the family changes.

The Decision Is Bigger Than This Year’s Bracket

The traditional IRA you decide not to convert doesn’t escape taxation.

For most families leaving pretax retirement assets to individual heirs, the decision just determines who pays it later.

That could be you, through required distributions.

It could be a surviving spouse, filing single.

Or it could be your children, emptying the account during the highest-earning years of their lives.

So the question isn’t whether you’re comfortable paying 22 percent today.

The question is whether 22 percent is the lowest rate your family will ever see.

The IRA gets taxed eventually. What’s still up to you is whose return it lands on, what rate applies, and whether anybody chose it on purpose.

Build the projection while you still have the choice.

Then decide on purpose. That’s what clarity, confidence, and peace of mind look like on a tax return.

Sources

1. Internal Revenue Service, Publication 590-B, “Distributions from Individual Retirement Arrangements (IRAs),” including beneficiary categories, the ten-year rule, and inherited Roth IRA distribution rules. https://www.irs.gov/publications/p590b
2. Internal Revenue Service, “Retirement Topics: Beneficiary.” https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
3. U.S. Department of the Treasury and Internal Revenue Service, “Required Minimum Distributions,” final regulations, July 19, 2024. https://www.govinfo.gov/content/pkg/FR-2024-07-19/pdf/2024-14542.pdf
4. Internal Revenue Service, Publication 590-A, “Contributions to Individual Retirement Arrangements (IRAs),” including the taxation of conversions and the rule that a required minimum distribution can’t be converted. https://www.irs.gov/publications/p590a
5. Internal Revenue Service, “Roth IRAs,” including qualified distributions and the five-year holding period. https://www.irs.gov/retirement-plans/roth-iras