The SECURE Act has passed! We believe some clients will be impacted in one of these three ways. Download our free report on Estate Planning with IRAs to read more.
1. The Required Minimum Distribution (RMD) Age was increased from 70 ½ to 72.
This is a positive change and will benefityou if you have a large amount of tax-deferred savings in an IRA. You can nowgrow your IRA money for another year and a half if you’re not yet in a positionwhere you need to start taking your RMDs.
2. If you are over the age of 70 ½ and have earned income, you can continue to contribute to your traditional IRA.
Before this law, if you were 70 ½ or older,you could not contribute to your traditional IRA like you could with a RothIRA. Now if you are still working, you may continue to contribute all orsome of your earned income to your IRA. This is another positive change!
3. Lastly, there were changes to eliminate “Stretching” an inherited IRA for non-spouses.
Up until this law passed,non-spousal beneficiaries of IRA accounts like children, could typically takedistributions from an inherited IRA over their own life expectancy, which meansit could have been drawn out over many years depending on how old they were atthe time the account was inherited. This strategy was used to reduce the taxburden of receiving a full inheritance during peak earning years (think45-65-year-old adult children). Receiving a large inheritance during this timecould put your heirs into a higher tax bracket, which would ultimately reducethe inheritance they receive from you.
Now, the SECURE Act requiresmost non-spousal beneficiaries to withdraw 100% of the inherited IRA over a10-year period. This change would likely only impact IRA heirs that are set toinherit a large amount since smaller IRA amounts are typically used up within10 years by most.
If you are concerned aboutthe potential tax burden of your non-spouse IRA heirs receiving theirinheritance faster, you may need to have your estate plan adjusted. Call ouroffice to learn more about upcoming seminars where we’ll be reviewing thesechanges in greater detail or to schedule a consultation with an attorney.
