Many regular readers of our Brevard County legal blog will undoubtedly recall that we wrote late last year about the SECURE Act (Setting Every Community Up for Retirement Enhancement), the bipartisan legislation signed into law in December.
While both Democrats and Republicans supported the measure designed to make it easier for workers to save for retirement – and provide incentives for employers to provide retirement plans – one Florida newspaper notes that “the new law has drastically disrupted traditional IRA strategies as it pertains to one’s estate planning.”
The Sun Sentinel states that “without the proper planning IRA beneficiaries could face enormous tax bills.” Why? The new law changes some ground rules, most importantly perhaps, it allows some people to delay required minimum distributions (RMD). That change will reduce current tax revenues, the paper says, though the measure also contains provisions designed to increase tax revenues.
“This increase in tax revenue will be borne largely by the children and grandchildren of the retirees who inherit retirement accounts,” the Sun Sentinel reports.
Because IRA withdrawals are fully taxed as current income, financial advisers used to urge clients to defer withdrawals as long as possible. Before the SECURE Act, the IRA holder could pass the balance in the IRA tax-free to beneficiaries who could then withdraw funds throughout their lives.
“But the new law turns that logic upside-down,” the paper says. Now IRA beneficiaries are no longer required to take RMD, but they are required to withdraw all money from the IRA within a decade. That means that without proper planning, beneficiaries could be pushed into higher tax brackets by their inherited IRA income.
To avoid those kinds of tax headaches (and bills), talk to your Brevard County estate planning attorney about steps to take to protect your family.