ira

Submitted by don norton on Wed, 2019-06-05 16:04

do i understand that the federal legislature is considering limiting a non spouse beneficary not being able to use the stretch approach to ira distributions but maybe a 10 year payout period . this would be a disaster. any suggestions what can be done? thanks for your help.



Submitted by Alan - IRA critic on Wed, 2019-06-05 22:55

Yes, each house of Congress is sponsoring a bill that includes limitation of the stretch for non spouse beneficiaries of all accounts. One exempts 400-450k per beneficiary with a 5 year rule for those who inherit more, the other has a 10 year rule for all non spouse beneficiaries. There are limited exceptions such as minors and the disabled. This could become effective for deaths as early as 2020, but nothing is certain these days until the provisions are actually signed into law.

Submitted by Bruce Steiner on Mon, 2019-06-10 12:40

  • The workaround is to leave the IRA to a charitable remainder trust.  That will replicate the stretch.  The charitable remainder trust will collect the IRA at once (but without current tax), and make distributions to the beneficiaries over their lifetime, or to a trust for the benefit of the beneficiaries over 20 years.
  • The tradeoffs are the lack of flexibility and the actuarial value of the charity’s interest has to be at least 10% of the initial value.
  • Bruce Steiner

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