Roth conversions for aging parents can reduce a family’s combined income tax bill when parents are in a lower federal bracket than the children who will inherit their IRA. By converting traditional IRA dollars and paying tax at 10% or 12% today, parents may spare their children from withdrawing those same dollars later at 32%, 35%, or more under the 10-year rule for inherited accounts. The strategy is not right for every family, and the numbers must be modeled carefully, but it remains one of the most overlooked opportunities in legacy planning.
In more than 20 years of working with families, I have seen how often retirement decisions are made one generation at a time. Parents ask how to keep their own tax bill low this year. When the IRA is ultimately headed to their children, that question may not be the most complete one.
Why Roth Conversions Can Be a Family Wealth Planning Strategy
Every dollar in a traditional IRA carries a deferred tax bill; the question is who pays it, and at what rate. For 2026, the 12% bracket for married couples filing jointly extends to $100,800 of taxable income, while the 35% bracket begins at $512,450 [1]. A retired couple and a high-earning adult child could face a 23-percentage-point gap on the same dollar. Evaluating taxes across generations, rather than only the parents’ current-year bill, is what turns a routine conversion into a tax-efficient wealth transfer strategy.
How Is an Inherited Traditional IRA Taxed?
Withdrawals from an inherited traditional IRA are generally taxed as ordinary income. Under the SECURE Act, most non-spouse beneficiaries, including adult children, must empty an inherited IRA by the end of the tenth year after the owner’s death. Longer payouts remain available mainly to eligible designated beneficiaries: a surviving spouse, the owner’s minor child (until age 21), a disabled or chronically ill individual, or someone not more than 10 years younger than the owner [2]. Trusts and estates follow separate rules.
Final IRS regulations add a second layer. If the parent died on or after their required beginning date for RMDs, the beneficiary must also take annual RMDs in years one through nine [3]. Those years often coincide with the children’s peak earnings, so inherited distributions stack on top of salaries, bonuses, or business income.
How Do Roth Conversions for Elderly Parents Work?
A Roth conversion moves money from a traditional IRA to a Roth IRA, and the converted amount is generally taxable as ordinary income that year. Since 2018, conversions can no longer be recharacterized, so each one is permanent [4].
Parents in the 10% or 12% bracket often have room to convert a set amount each year without reaching the 22% bracket. Spreading partial conversions across several years keeps more income in lower brackets than one large conversion would. Converted dollars also shrink the traditional IRA, lowering future RMDs, since Roth IRA owners have no lifetime RMDs [5]. The right annual amount should come from an individualized tax projection, not a rule of thumb.
Traditional IRA vs. Roth IRA: What Adult Children May Inherit
| Inherited traditional IRA | Inherited Roth IRA | |
| Tax on withdrawals | Ordinary income | Generally tax-free |
| 10-year rule (most non-spouse beneficiaries) | Applies | Applies |
| Annual RMDs in years 1 through 9 | Required if the owner died on or after their required beginning date | Not required |
| Timing flexibility | Limited by RMDs and bracket management | Any timing within the 10 years |
The Roth five-year rule still matters. The clock starts January 1 of the tax year of the owner’s first Roth contribution or conversion and carries over to the beneficiary. Contributions and converted amounts come out tax-free; only earnings withdrawn before the five years are complete may be taxable [2]. Beneficiaries can let the account grow and withdraw it in year ten, or draw it down in a lower-income year.
A Hypothetical Example: Parents in the 12% Bracket, Children in the 35% Bracket
Consider a hypothetical retired couple, both over 65, filing jointly in 2026. After the $32,200 standard deduction, two $1,650 age-65 additions [6], and two $6,000 enhanced senior deductions [7], their taxable income is $40,000 on adjusted gross income of about $87,500. We assume their Social Security is already taxed at the maximum 85% inclusion. They plan to leave a $300,000 traditional IRA to their daughter, who files jointly with $560,000 of taxable income.
Scenario A: The parents convert. They convert $60,000 a year for five years, starting in 2026. Through 2028, taxable income rises to $100,000, still inside the 12% bracket [1], and adjusted gross income rises to $147,500, below both the $150,000 senior deduction phaseout [7] and the $218,000 joint IRMAA threshold [8]. Federal tax is $7,200 a year. The senior deduction expires after 2028 [7], so in 2029 and 2030, $11,200 of each conversion would fall in the 22% bracket, raising the tax in those years to $8,320. Total federal tax on the conversions is $38,240.
Scenario B: The daughter inherits the traditional IRA. She withdraws $30,000 a year for 10 years at 35%, or $10,500 a year and $105,000 in total.
On the same $300,000, the simplified federal income tax difference is $66,760.
This is a tax-rate comparison, not a projection of lifetime savings. It ignores investment growth and state income tax, holds 2026 brackets constant, and assumes the conversion tax is paid from savings outside the IRA. Results also depend on how long the parents live, the daughter’s future income, and future tax law.
Important Tax Considerations Before Converting
Medicare IRMAA. Medicare sets Part B and Part D premiums using income from two years earlier. For 2026, surcharges apply above $109,000 of 2024 income for individuals and $218,000 for joint filers [8], raising the standard $202.90 monthly Part B premium to as much as $689.90 [9]. A 2026 conversion could raise premiums in 2028.
Social Security and the senior deduction. Conversion income can cause up to 85% of benefits to become taxable [10], pushing the effective rate above the stated bracket. The additional $6,000 deduction for those 65 and older, available for 2025 through 2028, phases out above $75,000 of modified adjusted gross income ($150,000 joint) [7].
Brackets and state taxes. A conversion that spills into the 22% or 24% bracket narrows the advantage. A parent in New York converting for a child in a state without income tax faces a different calculation than the reverse.
Liquidity, care costs, and funding. Paying conversion tax from outside savings preserves more in the Roth, but only if parents can comfortably part with that cash. Healthcare and long-term care costs can be substantial. The parents’ financial security comes first.
Charity and uncertainty. Dollars intended for charity are often better left in the traditional IRA, since charities pay no income tax on them. Tax laws can also change.
Why Multigenerational Tax Planning Matters
Income tax and estate tax are separate questions. The federal estate tax exclusion is $15 million per person for 2026 [1], while New York’s own estate tax applies above $7.35 million [11], and a few states levy inheritance taxes. Taxes paid on conversions also reduce the taxable estate.
Coordination makes the strategy work. Beneficiary designations must reflect the plan, since naming an estate can shorten the payout timeline, and families with children in different brackets may weigh which accounts go to whom. Future RMDs, expected inheritances, and family goals belong in one conversation.
How Opal Wealth Advisors Approaches Multigenerational Roth Conversion Planning
At Opal, Roth conversion analysis is part of comprehensive financial planning. We model conversion scenarios across multiple tax years, evaluate retirement income needs and projected RMDs, and compare the potential tax impact for parents and beneficiaries. We coordinate with each family’s CPA on tax projections, size conversions around the family’s circumstances, and review beneficiary designations. When trusts or estate documents are involved, we work alongside the family’s estate planning attorney, and we revisit the strategy as lives and tax laws change.
Frequently Asked Questions
Should elderly parents convert their traditional IRA to a Roth IRA?
It can make sense when parents are in a low bracket, have savings to pay the tax, and expect their children to inherit at higher rates. It rarely fits when that cash is needed for living or care costs.
Is it better to inherit a traditional IRA or a Roth IRA?
For most adult children, an inherited Roth IRA is more favorable. Qualified withdrawals are tax-free, annual RMDs are not required, and the beneficiary controls timing within the 10-year window [2].
Can Roth conversions reduce taxes for adult children who inherit retirement accounts?
They can. Conversions shift the tax to parents, who may pay at a lower rate. The net result depends on the bracket gap, state taxes, investment returns, and how the conversion tax is paid.
Do beneficiaries have to take RMDs from inherited Roth IRAs?
Most non-spouse beneficiaries do not take annual RMDs from an inherited Roth IRA, but they must empty it by the end of the tenth year after the owner’s death [5]. Surviving spouses have additional options.
What are the disadvantages of Roth conversions for retirees?
The tax is due upfront, conversions cannot be reversed [4], and added income can raise Medicare premiums, increase taxable Social Security, and reduce the senior deduction.
A Conversation Worth Having as a Family
The most effective wealth transfer strategies look past a single tax return. If you are weighing Roth conversions for aging parents, or expect to inherit an IRA yourself, schedule a conversation with our team to model what the numbers could mean for your family.
Sources
[1] Internal Revenue Service, “IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill,” IR-2025-103, Oct. 9, 2025. IRS
[2] Internal Revenue Service, “Retirement topics: Beneficiary.” IRS
[3] U.S. Department of the Treasury and IRS, “Required Minimum Distributions,” final regulations, Federal Register, July 19, 2024. Federal Register
[4] Internal Revenue Service, “Topic no. 309, Roth IRA contributions.” IRS
[5] Internal Revenue Service, Publication 590-B, “Distributions from Individual Retirement Arrangements (IRAs).” IRS
[6] Internal Revenue Service, Revenue Procedure 2025-32. IRS
[7] Internal Revenue Service, “Check your eligibility for the new enhanced deduction for seniors,” Feb. 27, 2026. IRS
[8] Social Security Administration, POMS HI 01101.020, “IRMAA Sliding Scale Tables.” Social Security Administration
[9] Centers for Medicare & Medicaid Services, “2026 Medicare Parts A & B Premiums and Deductibles.” CMS
[10] 26 U.S.C. § 86, “Social security and tier 1 railroad retirement benefits,” Legal Information Institute, Cornell Law School. Cornell Law School
[11] New York State Department of Taxation and Finance, “Estate tax.” New York State Department of Taxation and Finance