01/23/2026
A lot of people hear the word “Roth” and think:
“Tax-free later must always be better.”
Sometimes that’s true.
But sometimes the story is more complicated.
I recently reviewed a situation (details changed, of course):
Someone wanted to leave a large inheritance to their daughter. They had:
• a big pre-tax retirement account, and
• a big taxable investment account with lots of unrealized gains
Their plan was to convert large amounts to Roth so the inheritance would be “tax-free.”
On the surface, that sounds great.
But here was the wrinkle:
The taxable account had over $1M in unrealized gains — and if those assets are held until death, many of those gains may get a step-up in basis… meaning the tax on them could disappear for the heir.
So the question shifted from:
❌ “How much Roth can we convert?”
to:
✅ “Which taxes are we avoiding… and which ones are we creating?”
Roth conversions can remove future taxes — but you pay tax today.
Step-up in basis can remove some taxes later — but only in certain situations.
Inherited retirement accounts also have distribution rules to think about.
Big takeaway:
There is no universal “Roth is always best” answer.
It depends on timing, goals, heirs, assets, and trade-offs.
Sometimes Roth now makes sense.
Sometimes later.
Sometimes… not at all.
What matters most is slowing down long enough to understand which tax you’re actually trying to avoid — and when.
Have you ever been surprised at how different the Roth conversation looks when inheritance and step-up get involved?
Send a message to learn more
