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The article is reprinted with permission from Leimberg Information Services, Inc. (LISI).

By Bruce Steiner

The Cares Act suspended required distributions from defined contribution plans and IRAs for 2020. This allows many IRA owners who would otherwise have had to take distributions to do Roth conversions at lower income tax rates.

Facts About the CARES Act

Section 401(a)(9) sets forth the rules governing required minimum distributions (RMDs) from qualified plans and individual retirement accounts (IRAs).

In general, employees and IRA owners must take RMDs beginning with the year in which they reach age 70½, or 72 in the case of an employee or IRA owner reaching age 70½ after 2019. An employee or IRA owner may postpone the RMD for the year in which he or she reaches age 70 ½ or 72 until April 1 of the following year, though in that case he or she must still take an RMD for the following year. An employee who is not a 5% owner may postpone taking RMDs until he or she retires.

Section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (‘CARES Act) waived RMDs from defined contribution plans and individual retirement accounts (IRAs) for 2020.

Commentary and Analysis

Ignoring any basis resulting from nondeductible contributions, distributions from qualified plans and IRAs are included in income. Roth conversions are treated as distributions for this purpose, and are likewise included in income.

There are several benefits to doing Roth conversions.

  • To the extent the IRA owner has other money with which to pay the tax on the conversion, the conversion has the effect of a substantial additional contribution. There are no required distributions from a Roth IRA during a lifetime.
  • If an IRA owner leaves his or her traditional IRA in trust rather than outright, the trust will likely be taxable on the distributions at a higher rate than the beneficiaries except to the extent the trustees distribute the money to the beneficiaries. Since distributions from a Roth IRA are generally not taxable, a Roth conversion avoids this issue.
  • Qualifying distributions from a Roth IRA are not subject to income tax. So a Roth IRA is a more valuable asset to leave to a grandchild, a GST exempt trust, or a credit shelter trust.
  • If you convert to a Roth IRA, the income tax on the conversion is out of your estate. By contrast, with a traditional IRA, the Section 691(c) income deduction for the estate tax paid on income in respect of a decedent only covers the Federal estate tax, but not state estate or inheritance taxes.

However, if an IRA owner converts his or her entire IRA all at once, that will bunch the income into a single year. This will generally result in the IRA benefits being taxable at a higher tax rate than they would be absent the conversion.

A common solution is to spread the conversion over a number of years, so as not to be in too high a tax bracket in any year.

In particular, IRA owners who retire before reaching their required beginning date often do Roth conversions in the years between when they retire and when they reach their required beginning date so as to take advantage of their lower tax brackets in those years.

In this regard, the 12% bracket on a joint return goes up to $80,250 of taxable income in 2020, and the 24% bracket on a joint return goes up to $326,600 of taxable income in 2020. A couple may take a standard deduction of $24,800 in 2020, plus $1,300 for each spouse over age 65. Thus, a couple over 65 may have up to $107,650 of income and remain in the 12% bracket, or may have up to $354,000 of income and remain in the 24% bracket.

Without the income from RMDs, an IRA owner may be in a lower tax bracket in 2020. This allows IRA owners who would otherwise have to take RMDs to do Roth conversions at lower brackets than would otherwise apply.

Of course, an IRA owner who needs to take distributions for living expenses may not be able to take advantage of this.

Bottom Line

IRA owners whose required distributions are waived for 2020 should consider whether Roth conversions would be beneficial.

About the author: Bruce D. Steiner, of the New York City law firm of Kleinberg, Kaplan, Wolff & Cohen, P.C., and a member of the New York, New Jersey and Florida Bars, is a long time LISI commentator team member and frequent contributor to Estate Planning, Trusts & Estates and other major tax and estate planning publications. He is on the editorial advisory board of Trusts & Estates, and is a popular seminar presenter at continuing education seminars and for Estate Planning Councils throughout the country. He has served on the professional advisory boards of several major charitable organizations, and was named a New York Super Lawyer each year since 2010 and was selected for Best Lawyers of New York for 2018 and 2019.

Bruce has been quoted in various publications including Forbes, the New York Times, the Wall Street Journal, the Daily Tax Report, Investment News, Lawyers Weekly, Bloomberg’s Wealth Manager, Financial Planning, Kiplinger’s Retirement Report, Medical Economics, Newsday, the New York Post, the Naples Daily News, Individual Investor, CNBC, CBS News, Reuters Money, Fox Business,, Bloomberg, Observador and Dow Jones (formerly CBS) Market Watch.

The article, which is reprinted with permission from Leimberg Information Services, Inc. (LISI), originally appeared in the LISI Employee Benefits & Retirement Planning Newsletter #735 (May 13, 2020) at