Convincing Clients to Convert to a Roth in 2010

Although most wealthy clients understand the benefit of converting their IRAs into a Roth IRA, they hesitate to do so because of the income tax consequences. Some ideas that can help you convince your clients to convert this year are below:

• Find deductions that can offset the conversion income for your clients. Some clients may have potential net operating loss deductions or charitable deductions. For those clients who donate to charities regularly, setting up a charitable lead trust can yield thousands of dollars in deductions.
• Find tax credits to lower your clients’ overall tax bill. For example, your clients may qualify for the first-time homebuyer credit or valuation adjustments of private LPs or LLCs.
• Show your clients the unique advantages of 2010 Roth conversions. Explain the potential tax savings as well as their ability to split the conversion income between 2011 and 2012.

See Finding Deductions to Offset Roth Conversion Income, Financial Advisor, Oct. 5, 2010.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.