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IRAs and the SECURE ACT

It is time to review your IRAs and how you want them to be inherited.  The SECURE Act was attached to an appropriations bill at the end of December 2019 and passed into law.  Starting January 1, 2020, the “stretch out” rules no longer apply to inherited IRAs for people dying after that date, except for spouses and other limited exceptions.  Inherited IRAs will now be distributed within ten years, greatly affecting the value of distributions and the income tax payable on those distributions.  If you have a large IRA and you are concerned about a 10 year distribution to your beneficiary, then a conversation with your estate planning attorney may be worthwhile.  Alternative strategies currently include ROTH conversions (pay the income tax now so you and your beneficiaries don’t have to later) and accumulation “see-through” trusts where the trust shares the income tax burden of distributions and the trustee controls how much is distributed to the beneficiary.  If your estate planning document currently specifies a “conduit” trust, where IRA distributions must be paid out in full, you are strongly advised to talk to your attorney about amending your document to a “see-through” accumulation trust.