The SECURE Act & Inherited IRA Rules
By Paul Lechner, Esq., CPA — Lechner Law Office, P.C.
January 1, 2020: The SECURE Act
The SECURE Act — “Setting Every Community Up for Retirement Enhancement” — was passed as part of the 2019 year-end government funding package and became effective January 1, 2020. The Act increases government revenues by eliminating the ability to “stretch” IRA distributions over the lives of those who inherit qualified plans.
Key Changes
- The first required minimum distribution (RMD) for Traditional IRAs is now age 72 (previously 70½).
- There is no age cap on contributions to Traditional IRAs.
- Annuities are now permitted in 401(k) plans.
- Post-mortem “Stretch” RMDs over a designated beneficiary’s life expectancy are now largely eliminated.
The New 10-Year Rule
Funds in a retirement plan must now be distributed within 10 years of the participant’s death, unless the beneficiary is an “eligible designated beneficiary” — limited to: (1) the surviving spouse; (2) a minor child until majority; (3) a disabled individual (IRC 72(m)(7)); (4) a chronically ill individual (IRC 7702B(c)(2)); or (5) an individual not more than 10 years younger than the employee.
If qualified plan assets are expected to be significant in your estate, review how these changes interact with your estate planning documents and tax planning strategy, or contact our office to discuss your specific situation.