There are plenty of reasons to consider investing in a Roth IRA, including tax-free growth potential, flexibility, and tax-free withdrawals later in life.1 While high earners may not qualify to contribute to a Roth, they can often still convert some or all of their traditional IRAs to Roth accounts.
Among the reasons to consider this move: A Roth IRA offers unique benefits when it comes to estate planning, explains Michelle Caffrey, regional vice president of advanced planning at Fidelity. “Given the potential for tax-free growth and distributions, a Roth IRA may be the most income-tax-efficient asset to leave to your heirs,” Caffrey says. “For clients who want to maximize what they’re leaving to their heirs and spend down their own taxable estate, it’s very likely that we’ll be having a discussion about Roth conversions.”
Here are 4 reasons a Roth IRA may help you reach your estate-planning goals.
- Your savings have the potential to grow longer. Owners of traditional IRAs and other tax-advantaged retirement plans must take required minimum distributions (RMDs). The RMD age has increased to age 73 for anyone who born 1951 to 1959, and age 75 for anyone born after 1959. The original owner of a Roth IRA, however, does not have to take RMDs, nor does a spousal beneficiary who rolls the funds into their own Roth IRA. So if you don’t need to tap your Roth savings, you won’t be forced to withdraw those funds. Instead, you or your spouse can continue letting the money potentially grow in a tax-free environment. It also may allow for a more aggressive investment approach given the longer time horizon.
- Beneficiaries get income-tax-free distributions. While the original owner (and a potential surviving spouse) of any IRA may enjoy a longer window of either tax-deferred or tax-free growth, non-spousal beneficiaries who inherit these types of accounts may be in a different situation. The 2019 SECURE Act mandated that most non-spousal beneficiaries must withdraw the funds in any inherited retirement account—including Roth IRAs—in their entirety 10 years from the original owner’s death. Beneficiaries of non-Roth IRAs or 401(k)s must also pay income taxes on those withdrawals. This can result in tax-bracket creep, affecting their Medicare premiums, Medicaid eligibility, and taxation of Social Security benefits. Withdrawals from inherited Roth IRAs, however, are generally tax-free.1 “When you convert a traditional IRA to a Roth, with no intention of needing to use the Roth assets, you’re essentially prepaying the taxes on behalf of your beneficiaries,” says Caffrey.
In addition to federal income tax savings for the beneficiaries, Roth conversions can also be significant in certain situations when it comes to state income taxes: “An IRA owner who converts to a Roth in a state where they pay no taxes, such as Florida, is really helping that beneficiary who lives in a high-income-tax state like California or New York,” points out Caffrey.
- You can reduce your taxable estate. For 2026, the federal estate tax exemption is $15 million per person, allowing married couples to transfer a total of $30 million without federal estate tax exposure. There are also 12 states and Washington, DC. that have much lower state estate tax exemptions.. “A Roth conversion can be a strategy to potentially reduce your taxable estate by paying that income tax,” Caffrey says. However, the value of the Roth account at your death will be included in your estate for estate tax purposes.
- It offers a flexible option for a trust. If you own significant assets in retirement accounts and your estate plan incorporates a trust to be funded at death, depending on how the trust is structured, retirement accounts payable to the trust may well be subject to the 10-year liquidation rule or an even shorter distribution period. In addition, the income retained inside the trust will be subject to more income tax than it would be if paid outright to an individual. In 2026, the highest tax bracket for a trust is 37% and starts when taxable income reaches $16,000. In contrast, in 2026 the highest tax bracket for an individual, also 37%, starts when taxable income reaches $640,600. Accordingly, traditional IRAs payable to a trust at death may well be subject to a relatively quick, relatively large income tax hit. By converting a traditional IRA payable to the trust to a Roth, you can utilize the potential benefits of a trust, such as asset and distribution control, without being concerned with potential increased tax drag.2
Roth IRAs in the context of estate planning can be complex, and there are many situations in which a conversion may not make sense. “A Roth conversion has to be considered as part of your comprehensive financial and estate plan considering both short- and long-term impacts as well as alignment to your overall goals,” Caffrey says. Talk to your financial professional or attorney about whether a Roth IRA would benefit your family’s estate-planning goals.