Friday, August 11, 2017
If the Retirement Enhancement and Savings Act of 2016 becomes law, it may become more difficult to leave a qualified plan account or sizable IRA to beneficiaries without also leaving them with a substantial tax burden. The Act passed through the Senate Finance Committee in 2016 and calls for the abrogation of “stretch” provisions currently available to non-spouse beneficiaries of 401(k)s and IRAs. These provisions allow certain beneficiaries to extend minimum required distributions for as long as they like.
If the legislation moves forward, these accounts would have to be completely emptied in five years of all but $450,000. While this certainly does not work to the benefit of the account-holder, Uncle Sam gains about $3.18 billion in revenue from 2017 to 2026. Although passage of the bill is still very uncertain, if a stretch IRA is part of your estate plan, it may be a good idea to start looking for alternatives.
See Scott M. Dougan, Death of ‘Stretch’ IRAs Would Mean Loss of Flexibility for Beneficiaries, Kiplinger, August 2017.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.