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Estate planning: Converting IRAs in a volatile stock market

There has been a sell-off taking place in the stock market recently and that could actually be good news for those planning their estates. Louisiana residents who own stocks and who are thinking about estate planning should know there are ways to turn what most view as a negative situation into a more positive one by considering the ways the market downturn might be used to increase after-tax wealth, analysts say. One opportunity in particular may be of financial help and that’s the conversion of a traditional IRA into a Roth IRA.

With stock prices down, stockholders can convert more stock shares at a lower rate of tax. When traditional IRAs are converted into Roth IRAs, the amount converted is calculated in gross annual income for the tax year, while remaining in the Roth IRA. Lower stock values mean more stock shares or mutual funds can be converted at a lower tax cost.

All of an IRA doesn’t have to be converted all at one time. A portion of an IRA can be converted each year over several years. Experts advise converting some of a traditional IRA during times of being in a lower tax bracket to keep from being elevated into a higher tax bracket. 

A lawyer experienced in estate planning in Louisiana may be able to offer a client advice on things like IRA conversion and how it can be of benefit to an estate plan. There are many more aspects of a comprehensive estate plan than just having a will. An attorney is the best source of information regarding which documents a client should have in his or her estate planning portfolio to meet his or her needs. 


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