Preserving Wealth with Roth Conversions
August 21, 2025
Estate planning isn’t just about transferring assets—it’s about preserving wealth, maximizing what you leave behind, and minimizing the tax burden for your future beneficiaries. One strategy that has become increasingly valuable is Roth IRA conversions.
While Roth IRAs are often discussed in the context of retirement income, they can also serve as a powerful component of a broader estate and tax strategy, particularly for those who wish to optimize after-tax wealth for future generations.
What Is a Roth Conversion?
A Roth conversion involves moving assets from a traditional IRA or other pre-tax retirement account into a Roth IRA. The amount converted is treated as taxable income in the year of the conversion. Once inside the Roth, assets grow tax-free, and qualified withdrawals are also tax-free.
For some, the decision to accelerate taxes now for a conversion is often about gaining control over future tax exposure and ensuring that more wealth is transferred to heirs in the most tax-efficient way possible.
Future Tax Exposure
Tax laws evolve constantly, and high-income earners often face the greatest uncertainty. Even with the recent One Big Beautiful Bill, which made the 2017 Tax Cuts and Jobs Act rates permanent, it is impossible to predict future tax rates.
Traditional IRAs require account holders to begin required minimum distributions (RMDs) at age 73, generating taxable income regardless of whether it’s needed. These distributions are taxed as ordinary income, which can unexpectedly push a retiree into a higher bracket—especially when combined with other income sources.
When heirs inherit a traditional IRA, every withdrawal they take is taxable at their own ordinary tax rate. Under current law, most beneficiaries must withdraw all funds within 10 years, often during peak earning years, often creating a significant tax burden.
Roth IRAs, on the other hand, do not have RMDs during the original owner’s lifetime. This flexibility allows assets to remain invested and compounding tax-free for as long as desired. Converting to a Roth IRA locks in today’s tax rates, potentially lower than what you or your heirs may face in the future. By paying taxes now, you are protecting a part of your wealth from future rate increases and adding a measure of predictability to your long-term financial plan.
When heirs receive an inherited Roth IRA, they are still subject to the 10-year withdrawal rule, but those withdrawals are tax-free. This proactive approach can preserve wealth, simplify estate administration, and provide peace of mind knowing your beneficiaries won’t be burdened by large tax bills.
Strategic Tax Diversification
Diversification isn’t limited to investments; it’s equally important in tax strategy. Maintaining a mix of taxable, tax-deferred, and tax-free accounts provides flexibility to draw income, make gifts, or execute charitable strategies in the most tax-efficient way possible.
In many cases, it may be advantageous to stage Roth conversions over multiple years, which can smooth out the tax impact. While every situation is unique, Roth conversions tend to be most effective when:
· You have room to convert without pushing yourself into a significantly higher tax bracket
· You expect your own tax rate or your heirs’ tax rates to be higher in the future
· You can pay the tax due on the conversion from non-retirement assets
· You are seeking to enhance the after-tax value of assets transferred to heirs in your estate
Roth IRA conversions are more than just a retirement strategy; they serve as a powerful way to build wealth across generations. They provide opportunities for legacy planning, tax diversification, and protection against future tax risks. A successful execution depends on your personal situation, precise timing, and integration with your broader estate plan. It is essential to work closely with your financial and tax professionals. Thoughtful planning today can ensure a stronger financial future for you and your heirs.
By,
Susie McLane
Managing Director, Senior Wealth Advisor