Making Sense of SECURE

Written By:

Riley Carbone Kern

|

April 30, 2021

A review to help you catch up:

Before December 20, 2019, inherited IRAs could be distributed over the life expectancy of a beneficiary. On December 20, 2019, the SECURE Act became law, requiring inherited IRAs be fully distributed within 10 years. (There are some exceptions, but the 10-year rule applies to almost all non-spousal beneficiaries.) Everyone understood the SECURE Act to mean that beneficiaries could take distributions in whatever they wanted over the course of that 10 years. A beneficiary could even wait until year 10 and take it all at once.

The problem:

This year, the IRS issued Publication 590-B to help prepare 2020 tax returns. The Publication included examples on pages 11 and 12, and boy howdy did it raise a ruckus. (Well, as much of a ruckus as can be raised in the accounting and financial planning world.)

The now infamous pages 11 and 12 seemed to indicate that everyone had been reading the law incorrectly for since passage of the SECURE Act. The examples suggested that beneficiaries must take RMDs (Required Minimum Distributions) each year during that 10-year period, throwing planners and accountants into a bit of a tizzy.

But, according to an IRS spokesperson, the examples used on pages 11 and 12 were incorrect, and IRA inheritors have 10 years to take distribution in whatever fashion they prefer. The agency will be issuing a corrected Publication 590-B to clear up any confusion.

Still might be a problem:

Many people have spent their working lives aggressively saving in qualified retirement plans, like traditional IRAs, because of the preferential tax treatment. They have intended to use these IRAs as their primary wealth transfer tool, allowing their children to take distributions over their lifetimes, limiting their income tax liabilities and creating continued tax-deferred growth. But the SECURE Act disrupts this plan in a significant way.

If you have significant savings in qualified retirement plans, there still may be several ways for you to subvert the 10-year rule. We've presented about the issue HERE and written about it HERE.

Point is, it's worth discussing your options if 10 years isn't long enough. Let's make an appointment to talk.

Here's the stuff we always put at the end:

If you want to know more, we would love to talk with you. Best part, the conversation about how it could benefit you doesn't cost anything. If you're in the Tulsa area, call us at (918) 770-8940, or send an email to firm@tallgrassestateplanning.com. If you're in the Oklahoma City area, call (405) 358-3548 or send an email to howdy@tallgrassestateplanning.com.

Disclaimer: Reading this blog post does not create an attorney-client relationship, and it is not formal legal advice. This is for information purposes only. It is always best to speak with an attorney about your questions, assets, concerns, and needs.

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