Tag Archives: IRA

The New SECURE ACT May Require a Revision of your Estate Plan

On December 20, 2019, President Trump signed into law the “Setting Every Community Up for Retirement Enhancement Act” (the SECURE Act). This new law changes how IRAs and certain other retirement benefits must be treated after death. These changes are significant, and they may affect your existing estate plan.

With just a few exceptions, which I will explain below, the passage of the new SECURE Act eliminates the ability of a beneficiary of your retirement plan to stretch their receipt of those proceeds out over an extended period of time.

For example, in the case of an IRA, prior to the SECURE Act your beneficiary had the option to stretch his or her required annual minimum distributions over his or her life expectancy. This allowed the beneficiary to defer income tax while permitting the balance to compound. This was a very nice benefit, especially for beneficiaries who were much younger than the owner of the IRA. But now under the SECURE Act, most beneficiaries inheriting an IRA (or other defined contribution plans) will be required to completely withdraw all plan assets within 10 year of the date of the owner’s death. Continue reading →

SHOULD YOUR TRUST BE THE BENEFICIARY OF YOUR IRA?

An Individual Retirement Account (“IRA”) is a type of investment account that allows an individual to save money for retirement, with the earnings on the account potentially being tax deferred until they are later withdrawn at retirement. (Withdrawals from a Roth IRA can actually be tax free provided certain conditions are met).

In addition to the benefit of tax deferment of the earnings, contributions to a Traditional IRA can often be tax deductable, and the rules for deductibility vary depending upon a participant’s marital status and modified adjusted gross income.  Contributions to a Roth IRAare not tax deductable because they are made with money on which the individual has already paid taxes.

Passing on IRA Benefits After Death

IRAs are a common retirement tool for many people. But what happens to the remaining proceeds of an IRA account when the owner dies?  Many individuals assume that their IRA account will be distributed pursuant to the terms of their Last Will and Testament, with the account becoming part of their probate estate.  But the truth is that many IRA accounts are not subject to probate because the plan participant had established a beneficiary designation on the account during his or her lifetime. Establishing beneficiary designations on an IRA account can be a good way of keeping the asset out of probate, but it’s important to understand the pros and cons of the different beneficiary options.  Continue reading →