Sunday, August 11, 2019
Those that attained their wealth through inheritance are always on guard in case laws change that can affect their taxes. Two recently passed legislative measure may cause wealthy individuals an appropriate level of paranoia.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 passed the House of Representatives almost unanimously, with a vote of 417-3. The Act says that its intention is to encourage more businesses to offer retirement plans and expand opportunities for workers to invest their retirement account funds. It increases the age that a person must take out required minimum distributions (RMDs) from their IRAs, from 70.5 to 72. All that sounds good, but here is the nefarious part: instead of using an IRS table to allow a beneficiary to drain an inherited IRA, non-spouse beneficiary must eliminate the IRAs funds within 10 years of the person's death.
The Tax Cuts and Jobs Act dramatically increased the federal gift and estate tax exemption, and each following year until 2026 will be adjusted for inflation. But the exemption is scheduled to revert back to the much-lower pre-TCJA level in 2026. What tax ramifications would there be for large gifts made during this time? Proposed IRS regulations issued late last year would provide some protection by stipulating that folks who make large gifts while the exemption is in place would not be penalized if the exemption reverts back.
See Beware, the IRS is Eyeing Your Inherited Money, Wealth Advisor, July 15, 2019.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.