When is the last time you thought about your IRA plan if you pass away before using all the funds inside? Most people are aware that they can name a beneficiary for their IRA by filing forms with the management company but may not be entirely sure if the plan they have set up really reflects the best interests of their beneficiaries.
In 2009, the passing of the SECURE Act changed estate plans significantly. This is because many non-spouse beneficiaries set to inherit funds inside traditional IRAs went from a previous opportunity to stretch the distribution of that IRA over their lifetime into a 10-year window instead. Many families will need to rethink how they leave assets, particularly for grandchildren and children.
Note that minor children who become eligible to receive inherited IRA assets still have until they reach the age of maturity before the 10-year distribution clock begins. Partners, siblings or other beneficiaries who are not over 10 years younger than the account owner may still be eligible to spread the distribution over their life based on their total life expectancy, and individuals with disabilities can file for an exemption under that rule.
In the past, people may have chosen to use the Stretch IRA inheritance opportunity to leave money to a grandchild and then allow those distributions to fall over 40 to 60 years, but the window is now different and this presents a unique opportunity for reevaluating your estate planning strategy. Communicate with an experienced Pasadena area estate planning lawyer today to determine your current IRA gifting or inheritance strategy and how this may line up with your overall goals and established rules.
