by Robert S. Keebler, CPA, MST
© 1997, 1999, Robert S. Keebler
There appear to be eight distinct estate planning reasons to make the Roth IRA conversion election:
1. Taxpayers have special favorable tax attributes available in 1999 and beyond. A few attributes include charitable deduction carryforwards, investment tax credits, etc.
2. Suspension of the minimum distribution rules at age 70½ provides a considerable advantage to the Roth IRA holder.
3. Taxpayers have a moderate benefit for payment payment of income tax prior to the imposition of estate tax (when a Roth IRA election is made) compared to the income tax deduction obtained when a traditional IRA is subject to estate tax.
4. Taxpayers who can pay the income tax on the IRA from non-IRA funds benefit greatly from the Roth IRA because of the ability to enjoy greater tax-free yields.
5. Taxpayers who need to use IRA funds to fund their $650,000 unified credit bypass trust are well advised to consider making a Roth IRA election for that portion of their overall IRA funds.
6. Taxpayers making the Roth IRA election during lifetime, reduce their overall estate, thereby lowering the effect of higher estate tax rates.
7. Taxpayers have the ability to name a new beneficiary after age 70½.
8. Because federal tax brackets are more favorable for married couples filing joint returns than for single individuals, Roth IRA distributions won't cause an increase in tax rates for the surviving spouse when one spouse is deceased because the distributions are tax-free.
Robert S. Keebler is the author of the Planning with the Roth-Dream IRA audiotape, an article that appeared in PPC's Practitioners Tax Action Bulletin, Income and Estate Tax Planning with the Roth IRA, and the AICPA book, A CPA's Guide to Making the Most of the NEW IRAs.