Inheriting an IRA? The SECURE Act Could Impact Retirement Savings

October 2, 2019 – Inheriting an IRA from someone?  If you answered yes, there are some changes that you will need to consider with the passing of the SECURE Act.

In the past, beneficiaries that inherited an IRA could typically spread the taxable distributions over their own life expectancy.  Under the SECURE Act, IRA’s inherited in 2020 and beyond will need to be distributed over a 10-year period.  Exceptions exist for a surviving spouse, children under the age of majority, disabled, chronically ill, and individuals not more than 10-years younger than the account owner.  It is important to note that once minors reach an age of majority, usually 18, the 10-year period kicks in.

Proper planning will be important to help alleviate the potential tax burdens that accelerated distributions can create.  Roth conversions may offer a solution, however; there are some critical decision factors to consider.  For instance, the tax rate differential between the year of conversion and withdrawal years should be examined.  The key here is avoiding any large jump in tax brackets.

How is this accomplished?  If future tax rates are expected to increase, the gradual conversion to a Roth will help alleviate the tax burden.  Taxes will be owed on any untaxed earnings and contributions that are converted to a Roth, but later withdrawals from the Roth will be exempt from taxation.

If you have any questions or want to discuss other planning tactics, our Tax Advisory Group is always here to help!

About the Author

Dopkins Tax Advisory Group

Our more than 25 tax professionals include specialists who are proactive, strategic thinkers who work to maximize your cash flow. In addition to cash flow considerations, we also believe that tax planning is most effective when it is integrated with, and fully supports, your business plan and personal goals. Our approach to tax planning will help you better understand the tax implications of any proposed course of action, and together we can make the right decisions for your business. For more information, contact Robert Pollock, CPA at rpollock@dopkins.com.

Careers

Whether you are evaluating career opportunities as an accountant, business consultant or IT professional, you'll want to know what differentiates Dopkins & Company from all the competition. Learn more today.

Learn More