Roth Conversions: A Hidden Lever of Tax Planning for High-Net-Worth Families

As families grow their wealth, their financial lives naturally become more complex. We’ve observed while performance still matters, the real edge often comes from tax planning for high-net-worth individuals. For high-net-worth (HNW) and ultra-high-net-worth (UHNW) families, one of the most overlooked and misunderstood levers is the Roth conversion.

Done right, a Roth conversion is more than just moving money from one account to another. We help families use this strategy to smooth taxes across decades, reduce exposure to hidden costs like Medicare surcharges, and create a more flexible legacy for the next generation. Done wrong (or ignored entirely), it’s a missed opportunity that compounds into seven-figure mistakes.

Here are five ways to think about Roth conversions that go beyond the basics.

Roth Conversions as a Wealth Strategy

Many families know Roth IRAs grow tax-free but few fully appreciate their role in advanced tax planning for the ultra-wealthy. For HNW/UHNW households, the decision isn’t whether Roth conversions work, it’s when and how much.

1. Timing Is Everything

On the surface, Roth conversions make sense when tax rates are low. But working with wealthy families, we understand timing is more nuanced. The years between retirement and the start of required minimum distributions (RMDs) often create a “sweet spot” when income temporarily dips, leaving room to convert assets at more favorable tax brackets.

Why does this matter? Once RMDs begin, your taxable income can spike. Adding Roth conversions on top of that may push you into unnecessarily high brackets. Proactive timing by filling lower tax brackets now can avoid that future crunch.

2. Managing the Brackets with Precision

A Roth conversion isn’t all-or-nothing. The most effective approach is to “fill” specific brackets each year, often the 22% or 24% but even as high as 32% depending on the situation. For example, if your taxable income leaves $150,000 of space before crossing into the next bracket, converting exactly that amount creates efficiency.

This precision matters because wealthy families often have multiple income streams, such as investments, business income, real estate, dividends, and eventually Social Security. We’ve found converting smaller, targeted chunks keeps the strategy tax-efficient and sustainable.

3. Watching the Ripple Effects: Medicare & NIIT

The federal tax brackets are only part of the story. Wealthy families are also subject to “shadow taxes” like Medicare’s IRMAA surcharges and the 3.8% net investment income tax (NIIT). A poorly timed conversion can trigger tens of thousands of dollars in extra costs.

The key is forecasting the ripple effects. For example, converting in a year when large capital gains are realized might push modified adjusted gross income high enough to trigger IRMAA brackets two years later. We often help families coordinate conversions with investment sales, charitable planning, or business income to help sidestep these hidden penalties.

4. Estate Planning Advantages

For many HNW families, Roth conversions are less about reducing their own lifetime taxes and more about shaping what they leave behind. Unlike Traditional IRAs, Roth IRAs grow tax-free and pass tax-free to heirs (though beneficiaries must distribute funds within 10 years, as of 2025).

This can be powerful when wealth is expected to compound for decades. Converting at today’s known tax rates essentially “pre-pays” the tax bill for heirs who may otherwise face much higher tax brackets or compressed distribution schedules. As a result, Roth conversions become a tax-advantaged estate planning tool for families thinking generationally.

5. Flexibility in an Uncertain Future

One constant in tax planning is change. Brackets shift, exemptions sunset, and new rules emerge with each administration. The Roth IRA is one of the few tools that offer true flexibility amid this uncertainty.

Once funds are converted, future growth is insulated from future tax hikes. In an environment where tax rates for wealthy families are more likely to rise than fall, this is a meaningful hedge. And if rates stay the same? Families still benefit from simplified distributions, reduced RMD pressure, and the ability to strategically draw from both taxable and tax-free buckets in retirement.

Integrating Roth Conversions Into Your Wealth Strategy 

Roth conversions require careful analysis, coordination, and sensitivity to each family’s unique circumstances — all integrated into a broader wealth strategy. When layered thoughtfully, they can become one of the most valuable tax strategies for ultra-high-net-worth families.

The true benefit isn’t just a lower lifetime tax bill; it’s control — control over when and how income is recognized, how much of an estate ends up with the IRS, and how to balance lifestyle spending with long-term planning.

We’ve seen firsthand how overlooking Roth conversions can leave money on the table and cost wealthy families. They’re one of the most effective ways to shape their financial legacy.

We help families coordinate every step, model real-life scenarios, and align timing with care. If you’re ready to explore how Roth conversions can provide tax-planning opportunities, flexibility, and peace of mind for your loved ones, please contact us  to discuss more. 

Frequently Asked Questions About Roth Conversions

Are Roth conversions worth it for high-net-worth individuals?

Yes, when done strategically. Roth conversions can reduce lifetime taxes, lower required minimum distributions, minimize Medicare surcharges, and leave heirs with tax-free assets. The key is aligning conversions with income, bracket strategy, and estate planning.

When is the best time to do a Roth conversion?

It’s often in the years after retirement but before RMDs begin. During this period, income is temporarily lower. This window allows families to convert at more favorable tax brackets. The right timing depends on each household’s income, investments, and long-term wealth plan.

How do Roth conversions affect estate planning?

Traditional IRAs pass taxable income to heirs, who must distribute funds within 10 years. Roth IRAs pass tax-free growth. Converting at today’s known rates effectively “pre-pays” taxes, reducing heirs’ exposure to higher future brackets.

Do Roth conversions trigger Medicare surcharges (IRMAA)?

They can. Because conversions increase adjusted gross income, they may raise Medicare premiums two years later. Wealthy families should coordinate conversions with other income events, like capital gains or business sales, to avoid unnecessary surcharges.

Final Thoughts

Roth conversions can be one of the most impactful yet overlooked tax strategies for wealthy families. When timed and sized thoughtfully, they offer greater control over future taxes, reduce hidden costs, and strengthen multigenerational planning. The real value comes from integrating conversions into a broader wealth strategy—one that protects today’s lifestyle while building a more flexible, tax-efficient legacy for the next generation.