Start with what the SECURE Act did to inherited IRAs. Most non-spouse beneficiaries — adult children above all — must drain the account by December 31 of the tenth year after death. For a traditional IRA, if the owner died after required minimum distributions had begun, the IRS's final regulations also require annual distributions in years one through nine. There is no stretching it over a lifetime anymore. A $1.5 million traditional IRA inherited by a 57-year-old engineer earning $250,000 means roughly $150,000-plus of extra ordinary income per year for a decade, much of it taxed at 32–35% federal before state tax is added.

An inherited Roth IRA lives under the same ten-year deadline, but everything else about it is gentler. Because a Roth owner is treated as dying before required distributions begin, beneficiaries owe no annual withdrawals during the ten years — they can leave the entire account compounding and take it all out, tax-free, in year ten. The account that forces income onto your child's return at the worst possible time becomes an account that hands them a tax-free lump sum a decade later, having grown the whole way.

This is where the arbitrage lives. The question is never whether the embedded tax in a traditional IRA gets paid — it is who pays it, at what rate, in which state. A retired Arizona couple living on $120,000 can convert traditional dollars to Roth while filling the 12%, 22%, and 24% federal brackets and paying Arizona's flat 2.5% on top. Their child in California may face 32–37% federal plus up to 13.3% state on the same dollars. Converting at a combined ~25% to avoid a combined ~45% is not exotic planning; it is arithmetic with a deadline, because the conversion window narrows once RMDs and Social Security fill your brackets.

None of this means converting everything. If one child earns far less than another, leaving some traditional dollars to the lower-bracket child and Roth or step-up assets to the higher earner can beat a uniform split. If charity is in the plan at all, pre-tax dollars should go there first, since a charity pays no income tax. The right answer is a beneficiary-by-beneficiary design, not a single account type.

Project the inheritance the way you project your own retirement income. Take your pre-tax balance, grow it to your life expectancy, divide by your children's likely top combined bracket during a forced ten-year payout — then compare that to the cost of converting in your own low-bracket years. For most of our clients with $1.5M+ in pre-tax accounts and adult children in their working prime, the comparison is not close.

Sequence matters more than enthusiasm. The classic conversion window for Arizona retirees runs from retirement until Social Security and RMDs begin — often ages 62 to 73. Phased conversions inside that window, sized to a target bracket each year, routinely move seven figures from traditional to Roth without ever touching the 32% bracket.

Match assets to heirs deliberately: Roth and step-up-eligible taxable assets to high-earning children, traditional dollars to lower-bracket heirs or charity. Your beneficiary forms — not your will — are where this design actually gets implemented, so update them when the plan changes.

• Splitting every account equally among children by default, which hands the highest-bracket child the worst-taxed asset.
• Assuming heirs can stretch an inherited IRA over their lifetimes. For most adult children, that ended with the SECURE Act — ten years is the rule.
• Missing the annual-RMD requirement on inherited traditional IRAs when death occurs after RMDs have begun, which triggers penalties on top of the ten-year deadline.
• Leaving the conversion decision until RMDs start at 73, when forced income has already filled the brackets the conversions needed.
• Ignoring state arbitrage — paying Arizona's 2.5% now versus a child's 9–13% California rate later is part of the return on conversion, not a footnote.