Estate Attorney NJ

IRA Planning Fact Sheet

 

SECURE Act Rules on IRAs

• For many who inherit IRAs or 401(k)s starting in 2020, the SECURE Act eliminated the ability to “stretch” your taxable distributions and related tax payments over your life expectancy.
• If you’ve inherited an IRA on or after January 1, 2020 you must withdraw all assets from the inherited account within 10 years.
• There are 3 possible strategies to consider based on your situation: (1) withdraw the assets as evenly as possible over the 10 years, (2) wait until the end the of the 10-year period and then withdraw everything, and (3) make irregular withdrawals over the 10-year period.

The Exceptions

If you are married and inherit an IRA or 401(k) from your spouse, nothing really changes. You can still roll your spouse’s IRA or 401(k) to your name and take it out over your life expectancy. It is important to talk to an estate planning attorney to ensure you do the correct type of rollover when you spouse passes away. Additionally, you must take out the decedents RMD in the year of death prior to rollover.

There are four types of designated beneficiaries allowed to stretch a retirement plan:

• Spouse of original owner
• Minor child (not grandchild) of original owner
• Less than 10 years younger than original owner
• Disabled/chronically ill (as defined under the applicable sections of the Internal Revenue Code)

 
If you fit into these exceptions, it makes sense to stretch the IRA for maximum tax deferral.

Naming Beneficiaries of an IRA

It is critical that you review your beneficiaries with our firm.  We specialize in designating the correct beneficiaries for retirement plans, such as an IRA, which can be a complicated matter. With your estate as the beneficiary of your IRA or plan, the money in the account is first distributed to your estate, and then passes to your heirs according to the terms of your will. Having your estate as beneficiary is usually the worst possible beneficiary choice in terms of tax implications and your heirs may lose the tax deferral advantage.

Talk to us

If you are the owner or inheritor of an IRA or other qualified retirement plan, you may wish to take some time to consider how the SECURE Act may impact your own retirement accounts along with your beneficiaries and reevaluate your retirement, estate planning, and gifting strategies. Working with our firm we can clarify your personal and financial goals.

Remember, your plans should evolve as you do.

Any questions you may have you can attend one of our free estate planning seminars or call our office to set up a consultation with one of our attorneys at (908) 753-4155.