Did you know that the SECURE Act (
Enhancement Act) was recently signed into law on December 20, 2019?
Under the old rules -
Any beneficiary of an inherited IRA could “stretch” the distributions over their lifetime so that they could take out the required minimum distribution (RMD) each year based on their life expectancy. This provided the ability to significantly defer income taxation on the IRA funds. In addition, if the beneficiary was an applicable “see-through” trust (Conduit Trust or Discretionary Accumulation Trust), there was the ability to also control the distribution of the funds from the IRA to the beneficiary.
Under the new rules of the SECURE Act, the general rule is that there are
RMDs for inherited IRAs. Instead there is now a 10-year distribution requirement for the entire IRA account meaning that all inherited funds must be distributed within 10 years. This shorter time-frame means larger annual distributions and the potential for significant tax impact. There are limited exceptions in which the old RMD rules above still apply which allows for the “stretch” over the beneficiary’s lifetime. These new rules generally affect anyone who inherits an IRA from an original IRA owner who passes away after January 1, 2020.
In light of these new rules there are certain things you should consider doing now as part of your overall planning:
- Review your retirement account primary and successor beneficiary designations.
- Review your current estate plan documents.
- Review your overall income tax planning and consider potential planning ideas which could include ROTH Conversions, Life Insurance, and/or Charitable Planning.
- Review your overall investment planning and review taxable account and non-taxable retirement accounts.
If you have any questions or would like to schedule a time to discuss how the SECURE Act may impact you and your family, please do not hesitate to contact me.