2020 has brought major changes to Inherited IRA accounts and when they are distributed.
If someone dies in 2020 or later and leaves you as the beneficiary to his/her IRA, these changes in the law will significantly impact you.
Here’s what you need to know:
- Inherited IRA’s could previously be distributed over the course of the beneficiary’s lifetime. If you receive the IRA from the person that passed away, you are the beneficiary. So, if you are 40 when you inherit the IRA, you could stretch the payment out over your lifetime significantly reducing the tax consequences of the distributions.
- Now, if someone dies and you inherit their IRA you can no longer stretch the payout over your lifetime, you are required to have it fully distributed within 10 years.
- There are exceptions for beneficiaries such as spouses, minor children, beneficiaries less than 10 years younger than the decedent, and disabled individuals.
- These changes only effect accounts inherited on or after January 1, 2020 and do not effect currently existing inherited accounts.
Here are some other changes to retirement accounts that you might want to know:
- The age at which individuals must begin receiving distributions from their retirement accounts has been raised from 70 ½ to 72.
- There is no longer a prohibition on contributions to retirement accounts after the age of 70 ½, meaning that anyone at any age can contribute to an individual retirement so long as they are earning income.
- Part-time workers who have worked at least 500 hours per year, for three consecutive years, can participate in their employer’s 401(k) plan.
As with anything, knowledge is power!
If you are ready to start creating your Estate Plan, call the attorneys at OWENS & PERKINS at 480.994.8824 to schedule your FREE 30 minute consultation.