Effective January 1, 2020, the SECURE Act changed rules and requirements for certain retirement accounts including the IRA and 401(k). The Act increased the age at which the account owner is required to take a minimum distribution from 70 ½ to 72. Most important to note is the change to the timing of the distributions for non-spouse beneficiaries. Prior to the Secure Act, upon death of an account owner, a beneficiary could create an inherited IRA that would allow the beneficiary to stretch out the tax liability of the account through distributions over his or her lifetime. While a decedent’s spouse is still allowed to roll over the account, the SECURE Act no longer allows most non-spouse beneficiaries to defer the tax liability over their lifetime. A child as a beneficiary must now withdraw the entire account balance over 10 years, therefore making the distributions much larger and tax payments due sooner.
As retirement accounts often make up a large part of one’s portfolio, it is important to discuss your options regarding retirement account beneficiaries with your estate planning attorney.
