For savers who counted on a decades-long IRA stretch for their heirs, here are moves to consider in light of the rule change.
Make your spouse the heir to the IRA.
Surviving spouses still have favorable rules. For example, a spouse who inherits a Roth IRA could put the account in his or her name, not take payouts during life and then leave the accounts to younger heirs who get a 10-year stretch. Spouses who inherit traditional IRAs also have options. For example, a 72-year-old widow could take payouts over her life expectancy of about 26 years if she claims her deceased husband’s IRA as her own, and then leave the account to younger heirs at her death. Those heirs would get a 10-year stretch on remaining assets.
Review IRA trusts.
Some IRA owners have arranged to leave accounts to a trust at their death in order to preserve assets from spendthrift or ne’er-do-well heirs. Natalie Choate, an attorney and retirement-plan specialist in Boston, says it’s imperative for IRA owners who have set up trusts to revisit them soon. “Some types of IRA trusts make no sense under the new law, so people need to check its effect,” she says.
Look into life insurance.
The new law favors life insurance over IRAs as a tax-efficient way to move assets to heirs, says Mr. Slott, because life insurance payouts can be free of both income and estate taxes. Life insurance can also be more flexible than an IRA if the owner wants to leave assets to a trust, he adds. But policies must be bought with after-tax dollars, and buyers should purchase them with assets they won’t need during life. It’s also important to determine fees up front and learn whether insurers can raise them.
Do nothing.
A 10-year stretch is still a stretch. For inherited Roth IRAs, 10 years of tax-free growth with no required payouts is a good benefit. If the account is a traditional IRA intended for several young-adult heirs, then multiple payouts over 10 years could be spread over many low tax brackets if the heirs are just starting out.
https://www.wsj.com/articles/inheriting-iras-just-got-complicated-thanks-to-new-retirement-overhaul-11576904481 (paid subscription)
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Will be glad if our IRAs will hold for the duration..
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