The stretch IRA might be on its way out if the Secure Act becomes law. For now, advisors still have time to help clients figure out how this might affect their estate plans. Here are five key points to review.
While those heirs take their distributions, they're "stretching" the tax-deferred growth of the IRA over decades.
"It makes sense: Once you're dead, you don't need a retirement account," said Jeffrey Levine, CPA and CEO of BluePrint Wealth Alliance in Garden City, New York. He discussed estate planning techniques for IRAs at the American Institute of CPAs Engage conference in Las Vegas on Monday. Here are five points advisors should review with their clients to make sure they aren't caught off guard once stretch IRAs are out of the picture, according to Levine.Though the Secure Act does away with the stretch for nonspouse heirs, it makes an exception for a handful of beneficiaries: a surviving spouse, an owner's child who is still a minor, a beneficiary who is chronically ill or disabled, or a beneficiary who is no more than 10 years younger than the IRA owner.
Originally, a saver might have listed their 1-year-old grandson as the beneficiary of a large IRA, betting that the grandchild would benefit from stretching the tax deferral for 80 years."It might not make sense to do that anymore," said Levine.There's more to passing on an IRA than just naming beneficiaries.For instance, what if one of the heirs decides to disclaim the inherited IRA. Have you planned for that contingency? Prepare for it now.
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