Hope you’ve had a great holiday and are anticipating the new year! With some recent changes there’s more for us to maneuver around. This will be a busy year.
The biggest change is the new SECURE Act. There are many provisions. Here are the most important that may affect you. As you read below green is good, red is bad.
The SECURE Act passed both houses of Congress and the President has signed it into law. It’s created a new tax time bomb. They say they did it to keep the bill revenue neutral, but it will create big problems for some.
Included in the Secure Act are the establishment of tax-favored multiple employer retirement plans; it allows contributions to IRAs past the current cap of 70 1/2 years of age; it raises the age on Required Minimum Distributions (RMD) from IRAs from 70 1/2 to 72.
One of the Secure Act’s most important provisions is the removal of the Required Minimum Distribution provisions for stretch IRAs. This will affect everyone that inherits an IRA from someone other than their spouse.
Someone who inherits a $1 million IRA from parents or grandparents will now have their taxes skyrocket for the following 10 years by having to pull out about $125,000 per year – all TAXABLE.
As a source of tax revenue, the provision will lead to a tax hike for many and will cause chaos for several types of trusts. So-called “pass-through trusts,” for example, will have to be revised, as the current language could lead to heirs of trusts being restricted from accessing them and massive tax bills in the future.
The SECURE Act had been on the table much of the year (2019) with much input on the potential pitfalls. See the Wall Street Journal article that gives a good example of the potential pain, Planning to Leave an IRA to the Grandkids? Not So Fast.
We’ll look at each of these over the coming year to see how they may affect you.
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