The Future of Your IRA and How the SECURE Act Changed the Rules

The Setting Every Community Up for Retirement Enhancement (SECURE) Act fundamentally altered how inherited IRAs work for most non-spousal beneficiaries. Previously, beneficiaries could stretch distributions over their lifetimes, but the new 10-year withdrawal requirement eliminated this advantage for most heirs.

Key Changes and Implications

Congress continues making significant modifications to IRA regulations, prompting estate planning attorneys to monitor legislative developments closely. The IRS has proposed additional changes affecting IRAs, creating both new opportunities and restrictions for account holders.

“Having to empty inherited IRAs within 10 years makes the IRA less attractive from an estate planning perspective.” If your legacy strategy relied heavily on leaving IRA assets to heirs, it’s time to reassess your overall financial picture through an estate planning and tax lens.

Important Preliminary Questions

Before exploring alternatives, consider several foundational issues:

• Do you have sufficient retirement funds without relying on the IRA?
• Who are your current beneficiaries on retirement accounts and life insurance policies?
• Will your heirs be able to cover taxes on inherited IRA withdrawals, or must they use the inherited assets?

The Roth IRA Solution

Roth IRAs present an attractive alternative to mitigate SECURE Act restrictions. Key advantages include:

• Taxes paid during conversion, not at distribution
• No required minimum distributions during the account holder’s lifetime
• Tax-free growth potential
• Beneficiaries inherit accounts income-tax free (provided the five-year holding requirement is satisfied)
• Heirs can withdraw funds without diminishment from large tax burdens

Implementation Strategy

Rather than converting an entire traditional IRA to a Roth simultaneously, consider a gradual conversion approach over multiple years. This strategy allows you to coordinate with your estate planning attorney to minimize tax liability, particularly during lower-income years.

This flexible approach works whether converting the entire IRA or just portions, allowing you to balance current retirement needs with future generational wealth transfer goals.

If you need assistance understanding how the SECURE Act affects your estate plan, contact The Stegall Law Firm today to schedule a consultation.