Stretch IRA opportunities
I am hearing discussions that beneficiaries of IRA’s may lose the opportunity to take out IRA funds over 5 years and must lump sum IRA inheritance. First of all, did we lose the IRA Stretch opportunity? and if we did how true is this first question?
Thanks
Permalink Submitted by Alan - IRA critic on Tue, 2018-09-25 17:27
There have been proposals and bills that never got to a final vote over the last 5 years or so. The current bill would require the 5 year rule to apply for most non spouse beneficiaries. Spousal beneficiaries are exempted and there is no lump sum requirement. This bill remains quite far from passage, but as you can see these proposals do not seem to be going away. Much of the reason for these bills is the Supreme Court ruling in Clark v Rameker in June, 2014. The court found that inherited IRAs are not considered the retirement funds for the non spouse beneficiary, just for the owner. Therefore, federal bankruptcy creditor protection ended for inherited IRAs and that reasoning led to proposals to eliminate the stretch for similar reasons. The current proposal is also very complicated in it’s requirements, since 450,000 of the inherited IRAs would be exempt. Given that the IRS has wielded almost no control over current inherited IRA RMD compliance, a much more complex set of requirements is not going to work well unless oversight is vastly increased. So all you can do is stay tuned to developments as they occur. As of today, nothing has changed.