Will A Roth IRA Conversion Lower Estate Taxes?

Conversion won't lower estate taxes per se (although the fact that you prepaid the government taxes will make your estate value marginally lower), but it will lower the amount of ordinary income taxes beneficiaries would have to pay.

For example, if you have a $1 million regular IRA inheritance with no cost basis, the beneficiaries will owe income taxes on the entire $1 million.

If you converted to a Roth and paid $380,000 or so to do so out of taxable assets, the beneficiaries wouldn't owe income taxes on the $1 million, but of course the taxable assets used to pay for the conversion (which would have received a stepped up basis) would reduce the value of the other taxable assets they would have received.

It depends on the tax rates of beneficiaries, if they can use averaging to spread out the tax bite, etc.

David Loeper