A Retiree Who Dies at 82 With $700,000 Still in an IRA, Never Having Converted a Dollar, Leaves a Daughter in Her Peak Earning Years Ten Years to Pay Tax on All of It

His plan was simple: leave the IRA invested, take only the required distributions, and let the rest pass to his daughter. When he died at 82, the account still held $700,000. His daughter inherited the money, but she also inherited the tax bill, with withdrawals taxed at her rate during her peak earning years.

A traditional IRA works differently from a house or regular brokerage account. Contributions went in before tax, so every dollar withdrawn is taxed as ordinary income, and that unpaid tax stays with the account when it changes hands.

Ten Years, Plus Withdrawals Every Year

Under the SECURE Act, most heirs who aren’t spouses must empty an inherited account by the end of the 10th year after the owner’s death. Spouses, disabled or chronically ill heirs, and heirs less than 10 years younger than the owner fall under different rules.

IRS final regulations, effective in 2025, require heirs to take annual distributions in years one through nine and withdraw all remaining funds by year ten. Under SECURE 2.0, RMDs begin at age 73. At 82, he was well past that age. She can’t wait for a low-income year and take everything at once, so she must withdraw money every year while she’s working.

How Her Salary Fills the Brackets First

Each withdrawal stacks on top of her salary. For an individual filing alone in 2026, the 24% rate applies above $105,700, while the 32% rate applies above $201,775. A strong example would be what happens if she files single with $150,000 of taxable salary income and withdraws $70,000 each year. The account doesn’t grow, 2026 brackets stay in place, and only federal tax counts.

Every year, $51,775 of the withdrawal fills the rest of her 24% bracket. The remaining $18,225 lands in the 32% bracket. That comes to $18,258 in federal tax per year. Over the decade, she pays $182,580.

What Converting Would Have Looked Like

A Roth conversion moves money from a traditional IRA into a Roth IRA. The owner pays income tax on the converted amount that year. Qualified withdrawals after that, including by heirs, are tax-free. Either way, you pay tax. The only questions are whose rate applies and when.

For an individual filing alone in 2026, the standard deduction is $16,100. The 12% rate covers taxable income up to $50,400, and the 22% rate runs to $105,700. A retiree living on Social Security and small withdrawals often has unused space under those lines and can fill it by converting (we sized up that quiet window between the last paycheck and the first RMD in a free Roth conversion guide). Unused space is lost because it doesn’t carry over to the next year.

Now assume he had converted the entire amount over his retirement and paid 22% on all of it. His bill would have been $154,000, or $28,580 less than hers. That gap doesn’t count state income tax.

Other Moves That Shrink the Bill

Retirees who give to charity have another option. Starting at age 70½, a qualified charitable distribution sends IRA money straight to a charity, up to $111,000 in 2026. A QCD counts toward the year’s RMD and never shows up in adjusted gross income, reducing the balance without adding to taxable income.

The order of withdrawals affects heirs: drawing down the traditional IRA first leaves a Roth or taxable account for heirs. An inherited Roth must be emptied within ten years, but heirs don’t have to take annual RMDs, and withdrawals are generally tax-free. Taxable investments may receive a stepped-up cost basis at death, wiping out built-in capital gains.

Beneficiary forms are worth deciding on purpose. A daughter who’s a surgeon and a son who teaches would owe very different taxes on the same IRA. Leaving the traditional account to the lower earner and other assets to the higher earner brings down the family’s total tax.

When Doing Nothing Wins

Converting only pays off when the parent’s rate is lower than the heir’s. The median full-time worker earned $1,251 a week in the second quarter of 2026, or about $65,000 a year. A child earning that much, or one who inherits after retiring, could pay a lower rate than the parent would have. In that case, leaving the IRA alone was the better choice.

The math depends on one number that doesn’t show up on the parent’s tax return: what the child earns. If a parent doesn’t know, they’re guessing. The useful step is a conversation with the children about what they earn, since that figure determines which approach costs less.

Contact [email protected] for any questions or corrections.