Most IRAs Turn Into a Tax Bill for Your Children
Here’s How Roth Conversions Change That
Most people think of a traditional IRA as an asset they will one day leave to their children. But in many cases, it is not just an asset. It is a future tax event.
When your heirs inherit a pre-tax IRA, they do not receive the full balance shown on the statement. They inherit an account that will be taxed as it is withdrawn, often during their own peak earning years. That means one of the largest assets in your estate may also be one of the least tax-efficient assets to pass on. A Roth conversion can change that. It allows you to pay taxes on your terms so your heirs do not have to pay them on theirs.
The SECURE Act fundamentally changed how retirement accounts are passed down. Most non-spouse beneficiaries must now withdraw the entire account within 10 years. There is no longer a lifetime stretch option for most heirs.
This creates two problems: 1. Withdrawals are compressed into a shorter timeframe 2. Taxes are paid at the beneficiary’s tax rate, not yours
If your children are in their peak earning years, this can significantly increase the total tax paid on your IRA. This is one of the most overlooked dimensions of retirement planning. The decisions you make now about your IRA don't just shape your own tax future. They determine the financial reality your heirs inherit and most families don't discover the gap until after it's too late to close it.
The good news is that you have a choice. A Roth conversion doesn't just change your tax picture. It changes theirs.
What the SECURE Act Did to Inherited IRAs
Before 2020, heirs could "stretch" inherited IRA distributions across their own lifetimes, managing the tax impact gradually over decades. The SECURE Act ended that. Today, most non-spouse beneficiaries must fully distribute an inherited IRA within 10 years of the original owner's death.
Ten years sounds like time. But if your children are 45 to 60 when they inherit, those distributions land directly on top of their peak earning income, often pushing them into the highest brackets of their financial lives.
A $1,000,000 pre-tax IRA inherited by a child earning $180,000 per year doesn't produce $1,000,000 in wealth. When you factor in 7% annual growth from age 67 to 90, with no conversion strategy in place, RMDs begin eroding the account at 73, IRMAA surcharges pile on, and the heir faces a 32% tax bill on what remains. Across two generations, that $1M asset may deliver only $638K to your family. That's not a hypothetical, it's just arithmetic.
A Roth IRA tells a completely different story. Convert at 67, pay the tax once at 24%, and that same $1M compounds at 7% for 23 years, completely undisturbed, with no RMDs forcing distributions, no IRMAA surcharges, no heir tax bill. By age 90, that account has grown to $4.74M. Every dollar passes to your heirs tax-free.
Where Most Estate Plans Miss the Real Problem
Many estate plans do a good job of deciding where assets go. Far fewer address what those assets will actually feel like to the people receiving them. That distinction matters.
A brokerage account with a step up in basis, cash in the bank, and a pre-tax IRA may all appear as line items of similar value on paper. But they are not equally valuable after tax. A traditional IRA is often one of the most tax-heavy assets to leave behind because the account has never been taxed. Under today’s inherited IRA rules, your beneficiaries may be forced to recognize that income over a relatively short period of time.
So the estate planning question is not just who gets what. It is what kind of asset they are actually inheriting.
Two Paths. One Decision.
The comparison below is where this becomes real. It shows the difference between leaving a $1,000,000 IRA untouched versus converting it during a lower-tax planning window. Same starting asset. Same family. Very different after-tax result.
$1.50M balance at 73 · 17 yrs of rising distributions · avg 24% −$382K
Medicare premium surcharges across 17 RMD years −$54K
~$680K remaining at death · 32% over 10-yr rule · with 7% growth −$306K
$1M converted within 24% bracket · paid from non-IRA assets −$240K
Roth IRAs carry no lifetime RMDs — account compounds freely $0
No RMD income to trigger IRMAA · Roth distributions are tax-free $0
Why a Roth is a Different Kind of Inheritance
The tax comparison above shows the size of the difference. But the real advantage is not just that heirs may receive more. It is that they receive a more flexible asset.
Together, these advantages mean a Roth IRA left to heirs doesn't just pass on more money after taxes, it passes on a fundamentally different asset. One that gives them flexibility, certainty, and control over their own tax future rather than inheriting a problem yours left behind.
The question worth asking isn't whether you want to leave your family an inheritance, it's whether you want that inheritance to arrive tax-free or with a decade of tax bills attached to it.
What Position Are You In?
Before we get ahead of ourselves, you need to know what type of Roth conversion strategy is right for you. Take our complimentary planning tool below, to see where you land on completing your Roth conversion.
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What This Means for Your Family
If a large portion of your estate sits in pre-tax retirement accounts, there is a good chance the inheritance your family receives will look very different after taxes than it does on paper. That does not automatically mean you should convert everything. It does mean this should be evaluated intentionally.
To help you make your decision, our firm uses RothEdge, a proprietary planning framework that models the difference between converting and not converting and how it affects your heir inheritance. It also models how different conversion strategies impact your overall tax burden and estate planning goals.
The right question is not whether you want to leave an inheritance. It is whether you want to leave your heirs a tax-efficient asset or a future tax obligation. If you want clarity on what that difference looks like in your situation, the next step is to model it with your numbers.
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