I’d appreciate comments re the 2 questions below since there probably are no definite answers when there are so many uncertainties and unknown future events, including the returns on invested assets, that can alter the outcome of any decision.
An IRA owner (age 85) has 2 traditional IRA’s, his IRA-1 with a university beneficiary and his IRA-2 with a son beneficiary (age 52) and which is the IRA from which the owner takes his RMD each year and on which he pays a 25% U.S. income tax.
The IRA owner is in poor health and expects that he will die within 2-3 years and that the university will quickly receive his IRA-1 assets which will more than satisfy his RMD of about $30,000. for the year of his death so that he will not have to also take an RMD in that year.
If he does not take an RMD, his son’s inherited IRA will be about $30,000. larger but its future RMD’s will probably be taxed at the son’s marginal tax rate of 33% for another 13 years and the son will inherit $22,500. less than he would have if the father took a $30,000. distribution in the year of his death.
Q. 1: Is it better for this IRA owner to take his RMD in the year of his death with more cash to his son or to to leave that RMD amount in the IRA his son will inherit?
Q. 2: Or it a better choice for him to add to his existing Roth IRA, of which the son is the beneficiary, by doing a Roth IRA conversion of the $30,000. at a cost of $7,500.?