2020 ushered in the new SECURE Act. and with it came changes to inherited IRAs, which are also known as beneficiary IRAs. An inherited IRA is what’s left of your retirement account after your death. (It’s important to note that the rules for spousal rollovers haven’t changed.) Before the SECURE Act took effect, children who were inheriting the IRA could take a stretch of small annual payments over the course of their lifetimes, which was a great way of reducing taxes. It also protected the IRA from things like debt, divorce, and other common issues. A lot has changed with the 2020 SECURE Act, though.

Beneficiaries are required to empty the IRA within 10 years of the parent’s passing. That could be a problem is a large amount is being withdrawn from the IRA. The funds will come out at a greater frequency and volume than it would have under the old rules. That means the assets are more susceptible to debt, divorce, disability, or other factors.

Those with larger IRAs can prevent this by amending their estate plan to allow for the revokable trust to accumulate the distributions instead of sending them on directly to the beneficiary. This will help protect what’s left of your assets once you’ve passed, despite the changes brought on by the SECURE Act.

This video is presented by Tim Borchers, Esq., EPLS, AEP®, Partner of Borchers Trust Law Group in Medway, MA.

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