29 Jun I inherited an IRA from my spouse. Can I convert it to a Roth IRA?

Q. My wife passed away in 2010 and I inherited her workplace IRA contributions. I received the disbursement check in 2011 and promptly created an inherited IRA. About a week ago, I asked the investment company if I could convert it to a Roth and they said no, but I feel they’re giving me the runaround. Can I convert it?
— Considering options

A. We’re sorry to hear about your wife.

Unfortunately, the opportunity to convert the account has passed.

When you received the funds, you could have established the account as your own. Instead, you created an inherited IRA, which has different rules.

Only spouses have this option. Non-spouse beneficiaries must create the inherited IRA.

“Once you established the IRA as an inherited IRA you lost the ability to convert it to a Roth IRA,” said Martin Hauptman, a partner in the trusts/estates and taxation groups at Mandelbaum Salsburg in Roseland.

He said when your wife passed, you should have designated yourself as the IRA owner.

“The next step would have been to notify the IRA trustee that you wanted to convert the IRA to a Roth,” he said. “The trustee would have completed any necessary paperwork to document the conversion and ensure that all future withdrawals from the account are tax-free.”

After that was done, you would have completed Form 8606, Nondeductible IRAs, to document the conversion and calculate the taxable amount of the conversion, he said.

“You would have completed only part 1 of the form if you are converting part of the account. For any Roth conversions, you would have completed part 2,” he said. “The amount from line 18 of the Form 8606 is the taxable amount of the Roth conversion.”

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This story was originally published on June 29, 2020.

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