IRAs have become an important estate planning tool. However, as Congress seeks ways to raise revenue, they might make those IRAs less desirable for estate planning purposes.
Over the last few decades, estate planners have grown very fond of IRAs. The retirement accounts allow people to name a beneficiary who gets the account automatically without the need for a will or trust after the current account holder passes away.
It is a very simple way to pass wealth to the next generation that has many uses in estate planning.
IRAs make estate planning easier, in most cases.
With one type of IRA, known as a stretch IRA, the beneficiary of the account can even delay taking out required minimum distributions and delay and perhaps save a lot on taxes.
However, that benefit is now coming under fire as Kiplinger reports in "Death of 'Stretch' IRAs Would Mean Loss of Flexibility for Beneficiaries."
Congress is considering doing away with the ability to stretch IRAs for non-spouse beneficiaries, if the accounts hold more than $450,000.
This proposal has passed in the Senate Finance Committee as it is expected to raise federal revenue by a substantial amount. If this passes and becomes law, estate plans will need to be revisited.
This idea is not yet currently law.
However, people who uses IRAs as an important part of their estate plans would be advised to keep an eye on this issue and to start thinking about alternatives for their estate plans.
It would not be a good idea to get caught off guard.
Should this pass, failure to adjust your estate plans could cost your heirs large sums of money.
For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Kiplinger (August, 2017) "Death of 'Stretch' IRAs Would Mean Loss of Flexibility for Beneficiaries."