Q: I am 71 and retired. I will be getting a $30,000 lump sum that I can either pay the taxes on and roll to a Roth, or roll into my IRA without paying taxes on it. This money will most likely pass to my wife or, if she passes first, to my children. From their perspective, what are the differences? A: Which type of IRA you chose to roll this money into depends on your ultimate goal for the money and the tax burden you can afford. With a traditional IRA, you will pay income tax on future distributions from the account. With a Roth IRA, you’d pay income tax on that $30,000 now, but then you can make tax-free withdrawals from the account; you’ll also avoid paying capital gains taxes on any future appreciation. Your heirs will inherit the same tax treatment. If you want to leave as much wealth as possible tax-free to your heirs, then you should roll the lump sum into a Roth IRA. (This is also a better option if you think your heirs will likely end up in a higher tax bracket than you’re in now.) If you do this now, the $30,000 will be counted as part of your taxable income this year; it could also bump you into a higher tax bracket. Just be sure you can afford the tax bill on the conversion now, says Kansas City, Mo., financial planner Tyler Landes. If you can’t afford the one-time tax hit, you’ll need to roll it into a traditional IRA. (This is the most advantageous strategy only if you think your beneficiaries will be in a lower tax bracket than the one you’re in now.) Since you are older than 70½, you will have to start taking required minimum distributions (RMDs) each year — and pay income tax on them — based on your age. There’s also a third, hybrid option. If you can’t afford the one-time tax hit, you can opt for a delayed conversion, setting up a traditional IRA now and then rolling chunks of money into a Roth IRA over the next couple of years. (While the money is in the traditional IRA, you’ll need to take RMDs –but that money cannot be placed in the Roth.) “Splitting up the conversion to a Roth will help you maintain a lower tax rate and manage your tax exposure,” says Landes.