You can convert an inherited IRA to a Roth, but the rules depend on who you inherited it from

If you inherited an IRA from someone other than your spouse, you cannot convert it to a Roth IRA directly. The IRS does not permit non-spouse beneficiaries to do a Roth conversion on inherited accounts. However, if you inherited an IRA from your spouse, you have the option to treat it as your own IRA and then convert it to a Roth if you choose.

The distinction matters because spouse beneficiaries have conversion rights that other heirs do not. If you are not the spouse, your path forward involves taking distributions from the inherited IRA on a schedule set by law, and you cannot move those funds into a Roth account. If you are the spouse, you can roll the inherited IRA into your own IRA and then perform a standard Roth conversion.

Key Takeaways

  • Spouse beneficiaries can convert an inherited IRA to a Roth by first treating the inherited IRA as their own, then performing a conversion.
  • Non-spouse beneficiaries cannot convert inherited IRAs to Roth accounts under current IRS rules.
  • Non-spouse beneficiaries must take required distributions from inherited IRAs over a set timeline, which may be 10 years or spread across their lifetime depending on when the original owner died.
  • Spouse beneficiaries who convert will owe income tax on the converted amount in the year of conversion.
  • The SECURE Act changed inherited IRA rules significantly for deaths after December 31, 2019, affecting how long non-spouse beneficiaries can hold the account.

How spouse beneficiaries can convert an inherited IRA

If you inherited an IRA from your spouse, you have three options: leave it as an inherited IRA in your spouse's name, treat it as your own IRA, or roll it over to your own IRA. To convert to a Roth, you must first treat it as your own or roll it into your own IRA. Once you do that, the account becomes yours, and you can then perform a standard Roth conversion on all or part of it.

The conversion itself works like any other Roth conversion: you direct the IRA custodian to move funds from your traditional IRA (which now holds your spouse's inherited money) into a Roth IRA. You will owe federal income tax on the amount you convert, calculated at your ordinary income tax rate for that year. This tax bill is due when you file your tax return for the year of conversion.

The advantage of converting as a spouse is that you avoid the distribution timeline that non-spouse beneficiaries face. You are not required to drain the account on any particular schedule. You can convert the entire balance, part of it, or none of it, depending on your tax situation and retirement plans.

Why non-spouse beneficiaries cannot convert to a Roth

The IRS treats inherited IRAs differently depending on your relationship to the original owner. Non-spouse beneficiaries—adult children, grandchildren, siblings, or other heirs—cannot perform a Roth conversion on an inherited IRA. This is a hard rule with no exceptions. The reasoning is that inherited accounts are meant to be distributed to beneficiaries over time, not sheltered indefinitely in a tax-advantaged account.

If you are a non-spouse beneficiary, you must take distributions from the inherited IRA according to a schedule set by law. The timeline depends on when the original owner died. For deaths after December 31, 2019, most non-spouse beneficiaries must drain the entire inherited IRA within 10 years. Some beneficiaries—spouses, minor children, disabled individuals, or those within 10 years of the original owner's age—may have different rules, but conversion to a Roth is not one of the options available to any of them.

What happens to distributions you receive from an inherited IRA

When you take a distribution from an inherited traditional IRA, that money is taxable income to you in the year you receive it. You will report it on your tax return and pay federal income tax at your ordinary rate. This is true whether you inherited the IRA from a spouse or not.

If the inherited IRA contains both pre-tax and after-tax contributions (called a "basis"), the distribution is taxed proportionally. The IRS calculates what percentage of the account is after-tax money and applies that percentage to each distribution you take. You cannot cherry-pick after-tax funds to withdraw first.

Some beneficiaries wonder whether they can redirect inherited IRA distributions into a Roth IRA as a workaround to the conversion ban. This does not work. A distribution from an inherited IRA is a taxable distribution, not a conversion, and you cannot recharacterize it as a Roth contribution. The money comes to you as income, and you pay tax on it. You can then use after-tax dollars to fund a Roth IRA in your own name, but that is a separate transaction with separate contribution limits.

The 10-year rule for non-spouse beneficiaries

Under the SECURE Act, most non-spouse beneficiaries who inherited an IRA after December 31, 2019, must withdraw the entire balance by December 31 of the tenth year following the year of the original owner's death. This is called the "10-year rule." You do not have to take equal distributions each year—you can take nothing for nine years and then withdraw everything in year ten—but the account must be empty by the deadline.

The 10-year rule does not apply to certain beneficiaries: surviving spouses, minor children of the original owner, disabled individuals, chronically ill individuals, or beneficiaries who are not more than 10 years younger than the original owner. These groups have different distribution rules, some of which allow distributions to stretch over a longer period. However, none of these exceptions permit a Roth conversion.

Because the 10-year rule compresses the timeline for most heirs, you will owe income tax on the entire inherited balance within a decade. Some beneficiaries use this to their advantage by spreading distributions across multiple years to manage their tax bracket, while others take larger distributions in lower-income years.

Tax planning when you inherit an IRA

If you inherited a large traditional IRA, the tax bill can be substantial. Spouse beneficiaries who convert to a Roth will owe tax upfront but can then let the Roth grow tax-free. Non-spouse beneficiaries cannot convert, but they can manage the timing of distributions to minimize their tax burden.

One strategy is to take distributions in years when your other income is lower—for example, if you are between jobs or have taken a sabbatical. Another is to spread distributions evenly across the 10-year window rather than taking everything at once. Some beneficiaries coordinate inherited IRA distributions with charitable giving or other deductions to offset the taxable income.

If the inherited IRA contains employer stock or other appreciated assets, there may be additional tax considerations. A tax professional who works with inherited accounts can help you understand your specific situation and plan distributions to reduce your overall tax liability.

Frequently Asked Questions

Can I convert my spouse's inherited IRA to a Roth if they had a Roth already?

Yes. You can convert a traditional IRA you inherited from your spouse to a Roth regardless of whether your spouse had other Roth accounts. The conversion is treated as a standard Roth conversion and follows the same rules. You will owe income tax on the amount converted.

What if I inherited an IRA from my ex-spouse?

If you inherited an IRA from an ex-spouse and the divorce decree named you as beneficiary, you are treated as a spouse beneficiary for IRA purposes. You can convert the inherited IRA to a Roth. If the divorce decree did not name you as beneficiary, you have no claim to the account.

Do I have to convert the entire inherited IRA, or can I convert part of it?

If you are a spouse beneficiary, you can convert all or part of the inherited IRA to a Roth. You decide the amount. Non-spouse beneficiaries cannot convert any portion of an inherited IRA to a Roth.

What if the inherited IRA is already a Roth?

If you inherited a Roth IRA, there is nothing to convert—it is already a Roth. You must still take distributions according to the 10-year rule (if you are a non-spouse beneficiary) or you can treat it as your own (if you are a spouse). Distributions from an inherited Roth are tax-free if the original owner had held the Roth for at least five years.

Can I avoid the 10-year rule by converting to a Roth?

No. Non-spouse beneficiaries cannot convert inherited IRAs to Roth accounts, so this is not an option. The 10-year distribution rule applies to inherited traditional IRAs regardless of whether you want to convert them.