My adult kids are big earners. Should I do a Roth conversion now so they aren’t taxed as much on their inheritance?

Roth conversions can be a strategic move for tax planning, but they shouldn't be undertaken solely with the goal of minimizing taxes on an inheritance. The primary consideration should be your own financial situation and tax implications, rather than those of your adult children. Converting a traditional IRA to a Roth IRA means paying taxes on the converted amount upfront, but future withdrawals are tax-free.

Inheriting a traditional IRA can indeed create a tax liability for heirs, as they will have to take required minimum distributions (RMDs) and pay income tax on those distributions. However, this is just one aspect of a broader financial picture. Before considering a Roth conversion, it's essential to assess your own retirement needs, income, and tax situation. If you don't need the IRA assets to live on, a conversion might make sense, but it's crucial to weigh the tax costs of conversion against potential benefits.

Looking ahead, it's essential to monitor tax law changes and consider how they might impact your decision. The current tax environment, with relatively low income tax rates, might make a Roth conversion more attractive. However, tax laws and rates are subject to change, and future administrations may alter the tax landscape. Your next step should be to review your overall estate plan, consult with a tax professional, and consider how a Roth conversion fits into your broader financial goals and those of your heirs.

Originally reported by marketwatch.com. FundNews adds analysis for finance & markets readers.