Fortunately, though, employer retirement plans are required since 2010 to at least permit a nonspouse designated beneficiary to complete a trustee-to-trustee transfer to an inherited IRA, preserving the ability to complete a stretch. On the other hand, the transfer provisions are only available to the original beneficiary of the inherited employer retirement plan, and not any successor beneficiaries who can continue the stretch if available, but only from the original account.
On the plus side, the rules permitting a transfer from an inherited employer retirement plan to an inherited IRA also allow the assets to be shifted to an inherited Roth IRA, effectively giving the beneficiary the option of doing a Roth conversion even after the death of the original account owner.
This is a strategy uniquely available to beneficiaries of inherited employer retirement plans, as an inherited IRA may not be converted to a Roth.
This is a strategy uniquely available to beneficiaries of inherited employer retirement plans, as an inherited IRA may not be converted to a Roth. The caveat, however, is that just because it’s possible for a beneficiary to convert, doesn’t mean it’s wise to do so. After conversion, an inherited Roth IRA still has required minimum distribution obligations, and it will usually be preferable to convert any other type of pre-tax retirement account first.
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