Beginning for deaths after December 31, 2019, the stretch IRA for inherited IRAs will be replaced with a ten-year rule for most beneficiaries (exceptions below).
How Long Do I Have to Withdraw Funds From An Inherited IRA?
The new rule requires that inherited IRA accounts be emptied by the end of the 10th year following the year of death of the original IRA owner. There will be no annual RMDs. Instead, the only RMD on an inherited IRA would be the balance of the inherited IRA at 10 years after the original IRA owner’s death.
Can I Still Withdraw an Inherited IRA Balance Over the Course of Several Years to Spread Out the Tax Burden?
Yes. If you know that your tax bracket will be lower in certain years compared to others then you may want to withdraw more of your IRA balance in years where you will be in a lower tax bracket.
What Should I Do If I Own An IRA?
The new rules for stretch IRAs create a new landscape for retirement and estate planning. How will the new IRA rules affect you?
You may have some new opportunities to make IRA contributions or be able to access your retirement funds without a 10% early withdrawal penalty.
You may also be able to delay taking RMDs a little longer (e.g., age 72 instead of age 70.5).
You may want to give serious consideration to how the changes to the stretch IRA rules will impact you. For example, you may want to review the beneficiary designation in place on your IRA. The beneficiary designation controls who receives your IRA at your death.
If you have any questions about your estate plan or the new stretch IRA rules, please feel free to call the Thrash, Carroll, Vanway Law Group for help!
By: Chris Ha