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Monday, July 11, 2011

The Biggest Danger of a Roth IRA Conversion

After speaking with a client who did a ROTH IRA conversion last year, I realized that there is a major danger to these conversions. You cannot assume that the financial instituion will designate the same beneficiaries on the ROTH IRA as had been named under the traditional IRA. Many financial instituions will send out beneficiary designation forms separately, long after the converison has been done. If the owner is not expecting it, he or she may just throw away the form.

It is very important for anyone who has done a ROTH IRA conversion to double check the beneficiaries on the new account to ensure they are what you want. This is particularly true if you want to name an IRA Stretch Trust.

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