Banking & PERSONAL FINANCE
A Blank Slate Media Special Section • Januar y 10, 2020
28 GUIDE TO BANKING & PERSONAL FINANCE • Blank Slate Media Newspapers, Friday, January 10, 2020
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Significant changes made to IRAs BY ST E P H E N S I LV E R B E R G Passing the SECURE Act on Dec. 19, 2019, has changed how retirement account distributions must be made. Congress’ timing made it impossible for professionals to comply with the new law before its eective date of Jan. 1, 2020. By passing the SECURE Act, the IRS changed the deďŹ nition of a Designated BeneďŹ ciary for IRA and retirement plans. This is important as only Designated BeneďŹ ciaries, as deďŹ ned by the IRC §409(a)(9), may stretch the payment of an IRA over their life expectancies. Since 1976, when a Designated BeneďŹ ciary was deďŹ ned as a natural person, but IRS regulations treated certain trusts with individuals as Designated BeneďŹ ciaries. Under the SECURE Act, the only Designated BeneďŹ ciary eligible for stretch IRA treatments are: 1. Surviving spouses; 2. Minors under the age of majority (but they must withdraw the entire balance within ten years after attaining the age of the beneďŹ ciary); 3. An individual who is less than ten years younger than the account holder; 4. Disabled beneďŹ ciaries; or 5. Chronically ill beneďŹ ciaries. For the latter two categories, the original statute contradicted existing regulations and rulings. A task force of the National Academy of Elder Law Attorneys (of which I was a member) prepared an issue brief for the Congressional Joint Commission on Taxation pointing out the problematic issues. I am glad to announce the Joint Committee found our issues valid and amended the law to allow those beneďŹ ciaries to stretch their beneďŹ ts. Since the law is two days old, we are reviewing the statute to assure
our issues were properly addressed. Everyone else is no longer a designated beneďŹ ciary and must receive the entire account balance, including accrued interest, within ten years. Unlike the prior law, those beneďŹ ciaries have to take minimum distributions over the ten year period. The beneďŹ ciary can allow the account to accumulate income taxfree if the account is distributed by the end of the 10-year period. To make matters worse, every estate plan providing for stretch payments to those who are no longer Designated BeneďŹ ciaries are no longer valid and must be revised. There may be other options available. Many reputable estate planners have been blanketing the internet with seminars on how to handle the new act. Personally, while I agree with many of their conclusions, it would appear that except for limited circumstances, taking immediate action may be counterproductive, until a careful analysis of the law is complete. Many suggestions involve the purchase of life insurance using distributions from IRAs to pay the premiums. While this may be acceptable to many clients, some clients are averse to insurance or may be uninsurable. Other solutions oered are charitable remainder trusts. While they may be acceptable to some clients, the deferral is not as eďŹƒcient as the deferral under the old rule, and the charity must receive at least 5 percent of their trust assets. Beware of those who urge Immediate action! Besides not having adequately vetted the law, there appears to be a multitude of other planning devices being oered. Prudence dictates letting the dust settle before proceeding. If the wrong option is selected, it may be next to impossible to correct. Article submitted by Stephen Silverberg of the Law OďŹƒce of Stephen J.Silverberg in Roslyn
News Times Newspapers, Friday, January 10, 2020 • GUIDE TO BANKING & PERSONAL FINANCE
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LAW OFFICE OF
STEPHEN J. SILVERBERG, PC _ 5RVO\Q 5RDG 5RVO\Q +HLJKWV 1< _ ZZZ VMVODZSF FRP $WWRUQH\ $GYHUWLVLQJ
30 GUIDE TO BANKING & PERSONAL FINANCE • Blank Slate Media Newspapers, Friday, January 10, 2020
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