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X August 8, 2019, Do you have a trust listed as a beneficiary on your IRA?  Find out how that can potentially put you at risk.
Posted on August 8, 2019

August 8, 2019, Do you have a trust listed as a beneficiary on your IRA? Find out how that can potentially put you at risk.

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If the SECURE Act is passed (as we anticipate that it will be), and you have a trust listed as a beneficiary of your IRA, your retirement account could potentially be at risk.

If you have not yet heard, the SECURE Act will be doing away with the “Stretch IRA” for non-spouse beneficiaries. It will make it so that Inherited IRA’s cannot be “stretched out” for longer than 10 years. So, the “Stretch IRA” will essentially be eliminated, so long as the non-spouse beneficiary is not a minor, disabled, chronically ill, or not more than 10 years younger than the deceased IRA owner.

These changes create a detriment to all Trust beneficiaries. For example, any balance remaining in the inherited IRA at the end of the 10-year payout period would become the RMD at that point and have to be fully withdrawn (and taxes paid). More important, in many instances, the funds would lose their trust protection, which was most likely the reason your trust was set up in the first place. In other instances, the funds could be subject to the higher tax rates, raising additional issues.

Traditional trust planning will no longer be a viable estate planning strategy for large IRA’s, should the SECURE Act pass. Other (possibly more creative) solutions will be necessary, so we strongly recommend that you consider speaking with your Estate Planner about these issues and the viable alternatives to naming a Trust as your beneficiary.

Should you have any questions, please feel free to contact us.

Have a question for Debbie about retirement planning in Glen Rock, NJ?

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Taylor Financial Group, LLC

795 Franklin Avenue

Bldg. C, Suite 202

Franklin Lakes, NJ  07417

Debra Taylor, CPA/PFS, JD, CDFA Wealth Manager

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