Insight

The rules have changed regarding your IRAs, RMDs and estate plan

Many people’s estates typically include IRAs. Be aware that two major laws passed into law recently, the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, have had a direct effect on IRAs.

In a nutshell, the CARES Act waives required minimum distribution (RMD) rules for IRAs (and certain defined contribution plans) for calendar year 2020. If you’re fortunate enough that you don’t need to make withdraws from your IRA, there’s an opportunity to leave more for your heirs in your retirement plan. However, bear in mind that because the SECURE Act generally put an end to “stretch” IRAs, the estate planning benefits of inheriting IRAs are somewhat muted.

RMD rules waived

Not taking RMDs in 2020 is particularly advantageous because the amount of the distribution is based on year-end 2019 account values. Otherwise, you might be forced to liquidate account assets at depressed values during the stock market downturn.

The waiver covers both 2019 RMDs required to be taken by April 1, 2020, and RMDs required for 2020. It applies for calendar years beginning after December 31, 2019.

“Stretch” IRAs eliminated

Perhaps more important for some estate plans, the SECURE Act eliminates so-called “stretch” RMD provisions that have allowed the beneficiaries of inherited IRAs and defined contribution accounts to spread the distributions over their life expectancies. Younger beneficiaries could use the provision to take smaller distributions and defer taxes while their accounts grew.

Under the SECURE Act, most beneficiaries must withdraw the entire balance of an account within 10 years of the owner’s death. However, they don’t have to follow any set schedule. They can wait and withdraw the entire amount at the end of 10 years if they wish.

The new rules apply only to those inheriting from someone who died after 2019. Thus, if you inherited an IRA years ago, you won’t be subject to the new rules with respect to your RMDs. However, when your beneficiaries inherit the IRA from you, they’ll be subject to the new rules.

Review your plans

The changes made by the CARES Act and the SECURE Act may have an impact on your retirement and estate plans. We can help you review your plans to ensure that they continue to meet your objectives.

© 2020

Related Insights

Unlock your child’s potential by investing in a 529 plan | tax preparation in cecil county | Weyrich, Cronin & Sorra

Tax Prep, Planning & Strategy

Unlock your child’s potential by investing in a 529 plan

If you have a child or grandchild planning to attend college, you’ve probably heard about qualified tuition programs, also known as 529 plans.…
The amount you and your employees can save for retirement is going up slightly in 2025 | tax accountants in washington dc | Weyrich, Cronin & Sorra

Employee Benefit Plan Audits

The amount you and your employees can save for retirement is going up slightly in 2025

How much can you and your employees contribute to your 401(k)s or other retirement plans next year? In Notice 2024-80, the IRS recently announced…
Business alert: BOI reporting requirements have been suspended for now | accounting firm in baltimore md | Weyrich, Cronin & Sorra

Management Advisory Services & Business Consulting

Business alert: BOI reporting requirements have been suspended for now

New beneficial ownership information (BOI) reporting requirements that many small businesses were required to comply with by January 1, 2025,…

Connect with us

Use the form below to send us an email. WCS responds directly to all inquiries and general questions within 24 hours of posting.

This contact form is deactivated because you refused to accept Google reCaptcha service which is necessary to validate any messages sent by the form.