How the SECURE Act Changes Inherited IRA Planning

HNWEstate Planning

IRA Tax Law

  • Federal tax laws which allowed retirement accounts to remain tax deferred by allowing certain beneficiaries to delay the withdrawal of account funds over their lifetime has changed.
  • A new 10-year rule now applies. The 10-year rule says that for most designated beneficiaries, distributions from an inherited retirement must be paid out within 10 years after the death of the account owner.  Failure to withdraw these funds results in a penalty – 50% of the amount that was supposed to be distributed but wasn’t.

Understanding the New IRA Tax Law

The SECURE Act has introduced us to a new term in the language of tax deferred retirement.  Only a spouse, disabled person and a beneficiary less than 10 years younger than the deceased owner is exempt from the 10-year limitation.  The law says only a surviving spouse, chronically ill individual and a person who is less than 10 years younger than the account owner qualifies for the “stretch out” payments option over his or her life expectancy.  Children of a deceased parent are subject to the 10-year rule.  They are not exempt.

This rule change is significant in that it will severely limit the ability of many families to pass on their IRA’s, 401k’s and qualified funds together with the growth in these accounts to younger generations.

To discuss your NJ estate planning matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at  Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Estate Planning Attorney

Previous PostNext Post