Thank you for clarifying! No worries about the confusion; in my initial post I left out some relevant details with the intention of keeping things concise and not too granular... that clearly backfired!Sorry for the confusion! I assumed that your parents had 2 Roth IRAs totaling $400k, split more or less evenly. You clarified that your mom owns the $400k Roth in question, so my suggestion that your other parent's Roth have you designated as contingency beneficiary is 100% moot!
I think the way forward is to gift your sister her $200k from mom's Roth, then you would be the sole contingent beneficiary of the remaining $200k, either in your mom's original Roth IRA or a second Roth IRA that would be created in her name.
Any leftover funds above the $200k that you are "gifted" would go into another Roth owned by mom with both kids as beneficiaries. All future Roth conversions from mom's TIRA would go into this Roth IRA, not the Roth with you as sole contingent beneficiary.
Celia makes a good point that Vanguard has an asinine policy of making all VG IRAs have the same beneficiary structure. If your mom has her Roth at Vanguard, it would be simple to create "your" Roth at a custodian that allows separate beneficiaries, such as Fido or Schwab, etc. via a direct rollover custodian-to-custodian.
Yes, I think we will need to open a new Roth with a different custodian.
My mom's TIRA is significantly larger than my dad's. It generates the largest RMDs so it makes more sense to do larger conversions from that account first.Somewhat off-topic, but why are your parents not also converting some of dad's TIRA? Even if your parents are the same age, any actuary would tell you that mom is likely to outlive dad. Reducing his TIRA should probably be looked at closely, unless his TIRA is substantially smaller than mom's.
To clarify, they want to gift 10% (200k) to my sister. I don't want them to gift me the other $200k from their Roth because in a best case scenario that money grows tax free in that account for another 15-25 years (knock on wood), and in a worst case scenario it's money they can draw from if they need it. They are of sound mind and judgment and understand the risks of depleting this 10%. Outside of their portfolio they have a paid off primary residence (valued $750k) and a paid off vacation/investment property (valued $425k) which I help manage, so there are additional assets outside of the portfolio. They do have a tax advisor that has helped them avoid tax bracket creep and IIRMA surchages, and they do plan on seeking his advice on this particular situation.Maybe they can't afford to gift to either of you.
After all, $200K is 10% of their portfolio. And they want to give away 20% while still living?
To put taxes into perspective, the taxes will be the same amount if they withdraw $x more from tax-deferred as an RMD, extra withdrawal to taxable or do a Roth conversion with it. But before they do that, they need to know if a bigger withdrawal will push them into a higher tax bracket, subject them to IIRMA surcharges on Medicare premiums two years later, or subject them to NIIT (another tax for the "rich") Once their MAGI reaches about $200k (MFJ) per year on their tax return, these other things start to kick in. Do they have a tax advisor?
Statistics: Posted by TheColorist — Thu Oct 23, 2025 8:41 pm — Replies 52 — Views 3812