IRA Changes

While you were focused on the impeachment proceedings Congress was busy passing the retirement SECURE act. Its way too long name is the Setting Every Community Up for Retirement Enhancement Act of 2019 which was signed into law on December 2019 and became effective January 1, 2020. This law makes it easier and less expensive for employers to administer pension plans. For employees it makes changes to how beneficiaries of an IRA will be treated. I am sure there will be a number of continuing education programs on the subject. One of the earliest is provided by the state bar association on January 24, 2020. But among the many changes perhaps the most substantial is requiring beneficiaries of IRAs to elect to receive payments from the inherited IRA over a period of 10 years. Previously a beneficiary was allowed to take distribution over their life expectancy which could be, of course, substantially longer. What this meant was IRS was denied the taxation of those proceeds inherited until beneficiaries received the funds. Those beneficiaries had a tax exempt vehicle in which to invest during their lifetimes. I believe for spouses a special rule continues to allow them to pour over any distribution from an inherited IRA into their own IRA for subsequent distribution not subject to the new 10 year rule. Attorneys who have been involved in estate planning where IRA and other pensions are substantial assets should consider a review of wills and trusts as they apply to this new law. Now practically speaking there may be a better plan. Here it is: Having reached a certain age myself I would like to suggest not being terribly worried about beneficiaries getting distributions from your IRA or other pension. It may be time for you to realize that unless you spend it yourself your beneficiaries will live much better than you do on those deliciously inherited funds even if they are taxable since they did not work a single day to obtain them as you did. So it may be time for you to meet with a therapist rather than a lawyer with regard to your own retirement planning. If you plan properly perhaps the best result is that your retirement plan will be bordering on empty when you go to the great beyond. That in essence solves the tax situation for your beneficiaries and may make your own time here a lot more enjoyable.