WILL THE SECURE ACT’S NEW INHERITANCE RULE AFFECT YOU AND YOUR LOVED ONES?

WILL THE SECURE ACT’S NEW INHERITANCE RULE AFFECT YOU AND YOUR LOVED ONES?

01/13/2020 Tags: Announcements, In the News

President Trump signed the SECURE Act into law in mid-December, and it changes how some beneficiaries inherit money from retirement accounts.

But the good news is that not everyone will face higher taxes under the new bill.

The changes

The new rules say certain types of beneficiaries who inherit retirement accounts — including IRAs and 401(k) plans — are required to take out all of the money from those accounts within 10 years. That’s a change from the previous law that allowed those who inherited retirement plans to withdraw the money throughout their life expectancy.

Within the new 10-year timeframe, there’re no minimum distributions. But after the tenth year, the balance on any qualifying retirement account has to be zero.

Who is and isn’t affected

The SECURE Act’s changes don’t affect retirement accounts that “eligible designated beneficiaries” inherit. Those beneficiaries include the deceased account owner’s:

  • Surviving spouse.
  • Minor child.
  • Beneficiary who is less than 10 years younger than the account owner.
  • Beneficiary who is chronically ill.
  • Beneficiary who is permanently disabled.

But if you’re a beneficiary who isn’t a spouse — like an adult child, grandkid, nephew, or niece — you only have 10 years to withdraw everything from any retirement account you inherited.

Keep in mind that these new rules apply only when a retirement plan owner dies in 2020 or beyond. So, if you’ve been withdrawing required minimum distributions from a retirement account you inherited previously, you won’t be affected.

Here are a couple examples:

  • If your 76-year-old husband dies in 2020, you can put his Roth IRA in your name, and the new 10-year rule doesn’t apply.
  • But if your favorite 92-year-old aunt Edwina dies in 2020 too and leaves you her 401(k), and you’re 40, you’ve only got 10 years to pull out all the money from the account.

You can use this calculator to help understand how your required minimum distributions might change.

The SECURE Act contains other retirement plan changes too, including:

  • Increasing the required minimum distribution age from 70½ to 72.
  • Allowing people who have turned 70½ to contribute to a traditional IRA.
  • Providing penalty-free retirement plan withdrawals for any “qualified birth or adoption distributions.”
Allowing certain long-term part-time employees to take part in company 401(k) plans.


Submit A Request For Services

We'd love to get you connected with our team about any of CP's services using our online form.

MAKE A REQUEST

DON'T LIKE NUMBERS? WE DO.

At Casey Peterson, LTD, we understand not everyone loves the complexities of accounting like we do. That's what sets us apart from the rest. Our CPAs, accountants, and financial advisors truly love numbers, solving problems, and creating business and financial strategies for our clients.

We’re looking for clients who believe in good customer service — clients who want CPAs, accountants, and financial advisors who are big-picture thinkers and ethical problem solvers. We’re looking for relationships, not transactions.

If you want the same, we should talk.

Contact Us