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If You Have an IRA Inheritance Trust®, Read This!

By Phil Kavesh, Attorney


Finally, on December 20, the Congress actually passed some important bipartisan legislation!

The good news is it will keep the government's "lights on" for a while without making all of us suffer through another "shutdown" first.  There is also very good news for workers wishing to increase their contributions to tax-advantaged retirement plans.

However, there is also some bad news - - for inheritors of IRAs (including IRAs to which the deceased owner may have rolled over his or her company retirement plans).

Under prior law, non-spouse beneficiaries of an IRA could "stretchout" the taxable required minimum distributions over their life expectancies, allowing money to compound tax-free inside the IRA for many years. This income tax stretchout enabled beneficiaries to save more for their later retirement needs. In many cases, our firm recommended that clients establish an IRA Inheritance Trust® as beneficiary, to not only qualify for the maximum income tax stretchout for the individual inheritors but to enhance the protection of an inherited IRA from inheritors' spouses, divorces, poor spending habits, creditors, lawsuits and possible loss of government benefits.

The new law, except in a few cases, eliminates the life expectancy stretchout and limits it now to only ten years.  This means many people who established an IRA Inheritance Trust® may want to revoke it and change their IRA beneficiaries, or merely amend the Trust, or do nothing at all.  We are conducting an extensive analysis of the new law, as well as our Trust, to determine the most informed courses of action from here. 

There is no rush to take immediate action before year end, since this new law applies to IRA's of people who pass away on or after January 1st.  We intend to make our best efforts to issue a summary memo to clients who have our IRA Inheritance Trust®, by February 1st.  If you have this Trust and don't hear from us by then, please go ahead and contact us.

P.S. We may also present a series of special seminars on IRA planning under the new tax law - - which may be applicable to you, whether you have an IRA Inheritance Trust ® or not! Stay tuned!

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