How SECURE ACT could impact IRAs
Under the SECURE Act, if it passes the United States Senate all IRAs and qualified plans must be distributed within 10 years of death.
- Hi guys, today we're gonna talk about possible changes to IRA distributions that are up and coming in the SECURE Act. Welcome to Two Minute Tuesday where I attempt to discuss an estate planning topic in two minutes or less. So first, you're probably asking what is the SECURE Act? Well, it's a piece of legislation that affects individual retirement accounts and qualified retirement plans passed by the United States House of Representatives and it is short for Setting Every Community Up for Retirement Enhancement Act, or the SECURE Act. It is expected to pass in the United States Senate some time this fall. So why am I talking about it, and why is this important when we are talking about individual retirement accounts? If you have an IRA, you have probably heard of Required Minimum Distributions. Under the current law, assets in an IRA can be distributed based on the life expectancy of the beneficiary. And what we try to do is spread these required minimum distributions over as many years as possible. Under the SECURE Act, if it passes the United States Senate all IRAs and qualified plans must be distributed within 10 years of death. Now, there are some exceptions for surviving spouses, minor children, the disabled, and the chronically ill. However, let's think about this for a minute. Under the SECURE act, if you are the beneficiary of a one million dollar IRA, then your required minimum distribution could be around $150,000 a year or a lump sum of $2 million dollars at the end of 10 years. Compare that to current law where that same million dollars might only have a required minimum distribution in the 20 to 40,000 range over your life expectancy. So, as you can imagine, this will have a huge impact on taxes paid by a beneficiary and folks are already working on solutions to lessen the impact on people receiving these IRAs. Now, the SECURE Act still must pass the United States Senate, but it is my understanding that most experts expect it to pass in the fall and to become effective on December 31st of this year. So, that means this is probably a really good time to review your plan and your beneficiary designations because the tax implications could be greater than ever. So, to help you out, download our estate planning strategies guide below to get you started. Well, that is all for today, and as always, have a great day and an awesome week. We'll see you next time. Thanks again.