Is a Roth Conversion Mostly a Gift to Your Kids?

The rule almost nobody saw coming

There used to be something called the stretch IRA. When your kids inherited your account, they could spread the withdrawals, and the taxes, across their own lifetime. Decades of small, gentle draws.

A 2019 law called the SECURE Act ended that for most heirs who aren’t your spouse. Now, if your children inherit a traditional IRA, they generally have to empty it within ten years of your death. And under rules the IRS finalized in 2024, if you’d already started your own required withdrawals before you passed, your kids have to take money out along the way too, not just clear it at the end.

Why ten years is the worst possible clock for your kids

That decade rarely lands at a convenient time in your child’s life. For most adult children, the ten years after they lose a parent are also the stretch when their careers peak and their income is highest. The inherited IRA gets stacked right on top of that income, dollar for dollar, taxed as ordinary income at whatever bracket they’re already in.

They don’t inherit your money. They inherit your tax bill, paid at their rate, in their busiest earning years.

This is the last link in what we call the retirement tax avalanche, the chain where your required withdrawals push your income up, that drags more of your Social Security into the taxable column, that lifts your Medicare premiums, each one feeding the next and loading the slope. The piece that lands on your kids is the last block of snow to come down, and it comes down on them.

What a Roth changes

A conversion doesn’t stop the ten-year clock. Your kids still have to empty an inherited Roth inside ten years. Two things change, and they’re big.

They aren’t forced to take a withdrawal every year while they wait, which lets the money keep growing tax-free for the whole decade. And when it does come out, every dollar is tax-free.

You chose to pay the tax, at your rate, on a calm day, instead of leaving them a bill that hits at their rate on their worst tax years. It’s the old choice between paying tax on the seed or on the harvest. The twist is that here, it’s your kids who’d have paid on the harvest. A conversion is how you settle the seed yourself and lower the tax the whole family pays over time.

Is it really just a gift to the kids?

I’ll be straight with you. If you’re going to spend nearly every dollar yourself, this argument matters less, and we’ll tell you that. The legacy case is strongest for people who’ll leave a real chunk behind, a spouse, kids, or grandkids. A surviving spouse benefits too, because Roth money the survivor can draw doesn’t feed the higher single-filer taxes that hit after one of you passes.

But calling a conversion only a gift to the kids quietly assumes you have to choose between helping them and helping yourself. You might not.

Where it stops being only about the kids

Pair a conversion with guaranteed lifetime income, and get to it early enough, and the Roth doesn’t have to sit untouched waiting to become an inheritance. It can turn into income you actually draw on, and still pass tax-free to your kids on whatever’s left.

Done right, you can put less of your money to work, create more income for yourself, and leave more behind. The catch is time, the runway before you need the income. It’s the wholesale-versus-retail idea, buying income years ahead at a discount instead of paying retail the day you retire. The earlier we start, the more that runway can do.

When we’d tell you to skip it

We’re not here to talk you into a conversion for your kids’ sake if the numbers don’t hold. If you’ll spend it all, or there’s no runway left, the answer can be no, and we’ll say no.

Running the numbers is free and reversible. The conversion isn’t. There’s no recharacterization anymore, no undo button. It never hurts to look. It can hurt to act without looking.

One more thing on the math. Most online Roth calculators will lie to you, even by accident, because they can’t see your kids’ tax picture, your spouse, or your state. We run your numbers on what we believe is the most accurate conversion engine in the industry.

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Frequently asked questions

Does the 10-year rule apply to inherited Roth IRAs too?

Yes. Your kids still have to empty an inherited Roth within ten years. The difference is they aren’t forced to take a withdrawal each year along the way, and everything they take comes out tax-free.

Who’s exempt from the 10-year rule?

A short list of heirs the law calls eligible designated beneficiaries: a surviving spouse, a minor child of yours until they reach adulthood, someone disabled or chronically ill, and a beneficiary who isn’t more than ten years younger than you. Most adult children don’t qualify, which is exactly why this catches families off guard.

Will my kids owe tax on an inherited traditional IRA?

Yes. Withdrawals from an inherited traditional IRA are taxed as ordinary income, stacked on top of whatever they already earn that year. There’s no early-withdrawal penalty, but the tax bill is real.

Is a Roth conversion worth it if I plan to spend the money myself?

The legacy benefit is the single strongest reason to convert, which means if you’ll spend nearly all of it, the case gets weaker. It can still help your own tax picture or a surviving spouse. It depends on your numbers, not a rule of thumb.

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This article is for educational purposes only and is not tax, legal, or investment advice. Kurt H. Jackson is a licensed life and health insurance professional, not a CPA, attorney, registered investment advisor, or securities broker. Roth conversion results and tax outcomes depend on your individual situation and on current law, which can change. Any dollar figures are illustrative and hypothetical. Consult a qualified tax professional before acting.