• Menu
  • Skip to right header navigation
  • Skip to main content
  • Skip to secondary navigation
  • Skip to footer

Before Header

Call us to learn how to protect your family!  (512) 258-9455

logo

Estate Planning and Elder Law Website

Header Right

Attend a Free Seminar
  • Home
  • Who We Are
    • About Our Firm
    • Attorney and Staff Profiles
    • Advantages of Working With Our Firm
    • Speaker Connection
  • How We Can Help
    • Business Owners & Asset Protection
    • Estate and Gift Tax Figures
    • Elder Law & Medicaid Services
    • Family-Owned Businesses & Farms
    • Incapacity Planning
    • IRA & Retirement Planning
    • LGBTQ Estate Planning
    • Minor Children & Young Adult Planning
    • Pet Planning
      • What Can a Pet Trust Do For You?
    • Probate and Trust Administration
    • Remarriage and Blended Family Protection
    • Special Needs Planning
    • SECURE Act
    • Wills & Trusts
  • Webinars
  • Free Resources
    • Elder Law Resources
      • Elder Law Reports
      • Elder Law & Medicaid Definitions
    • Estate Planning Resources
      • Dangers of Do-It-Yourself Wills & Living Trusts
      • Estate Planning Checkup
      • Estate Planning Definitions
      • Estate Planning Reports
      • How to Attack Estate Planning for the First Time
      • Questions to Answer During an Estate Plan Review
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top 10 Estate Planning Techniques
    • Frequently Asked Questions
      • Estate Planning
      • Incapacity Planning
      • LGBTQ Estate Planning
      • Nursing Home Asset Protection
      • Probate & Trust Administration
    • LGBTQ Resources
    • Newsletters
    • Probate & Trust Administration Resources
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • The Mourner’s Bill of Rights
      • Trust Administration & Probate Definitions
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • Things You Need To Do When a Loved One Passes Away With a Will
    • Special Needs Resources
  • Blog
  • Contact

Mobile Menu

  • Home
  • Who We Are
    • About Our Firm
    • Attorney and Staff Profiles
    • Advantages of Working With Our Firm
    • Speaker Connection
  • How We Can Help
    • Business Owners & Asset Protection
    • Estate and Gift Tax Figures
    • Elder Law & Medicaid Services
    • Family-Owned Businesses & Farms
    • Incapacity Planning
    • IRA & Retirement Planning
    • LGBTQ Estate Planning
    • Minor Children & Young Adult Planning
    • Pet Planning
      • What Can a Pet Trust Do For You?
    • Probate and Trust Administration
    • Remarriage and Blended Family Protection
    • Special Needs Planning
    • SECURE Act
    • Wills & Trusts
  • Webinars
  • Free Resources
    • Elder Law Resources
      • Elder Law Reports
      • Elder Law & Medicaid Definitions
    • Estate Planning Resources
      • Dangers of Do-It-Yourself Wills & Living Trusts
      • Estate Planning Checkup
      • Estate Planning Definitions
      • Estate Planning Reports
      • How to Attack Estate Planning for the First Time
      • Questions to Answer During an Estate Plan Review
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top 10 Estate Planning Techniques
    • Frequently Asked Questions
      • Estate Planning
      • Incapacity Planning
      • LGBTQ Estate Planning
      • Nursing Home Asset Protection
      • Probate & Trust Administration
    • LGBTQ Resources
    • Newsletters
    • Probate & Trust Administration Resources
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • The Mourner’s Bill of Rights
      • Trust Administration & Probate Definitions
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • Things You Need To Do When a Loved One Passes Away With a Will
    • Special Needs Resources
  • Blog
  • Contact

IRAs and Inheritances

IRAs and inheritance planning

June 30, 2022 //  by Regina Slaton Schauer

IRAs and inheritance planning

How did the SECURE Act change regulations around IRAs (Individual Retirement Accounts)? In this article we will give you a broad look at IRAs, as well as an explanation of some of the changes made by the SECURE Act. Read on for more!

Traditional Individual Retirement Accounts

The defining feature of a traditional IRA is pre-tax contributions into the account. This means that distributions are subject to regular taxes. Remember, Traditional = regular Taxes. You can begin to take penalty-free distributions when you are as young as 59.5 years of age.

What if you need to make an early withdrawal? Is there a way to avoid the penalty? In truth, there are a few exceptions to the general rule around early withdrawals. For example, you can take out as much as $10,000 to help finance a home purchase as a first-time buyer. If you are unemployed, you can withdraw money to pay for health insurance premiums when certain circumstances exist.

Another exception gives you the ability to take distributions to cover unpaid medical bills. If you are permanently disabled, the age requirement is waived, and there is no penalty if you take distributions to cover higher education expenses.

Okay, so we covered early withdrawals. What about later withdrawals? When do you have to start taking money out of the account? This is one of the alterations under the SECURE Act. You are now required to take mandatory minimum distributions when you are 72 years of age; prior to the enactment of the SECURE Act, this age was 70.5.

A further change permits a traditional account holder to contribute to their account for an open-ended period of time. Prior to this alteration account holders who were older than 70.5 could not make contributions into their accounts.

Roth IRAs

Now that we’ve covered traditional individual retirement accounts, let’s look at Roth IRAs. Contributions into Roth IRAs are made after taxes have been paid on the income. This means that your distributions will not be taxed and account holders are never required to take mandatory minimum distributions. Why is this? The IRS received their tax money up front.

Roth IRAs are otherwise the same as their traditional counterparts with regard to the penalty-free withdrawal age and exceptions. Holders of Roth IRAs have always been able to contribute to their accounts indefinitely, and that has not changed.

Elimination of the Stretch IRA

What about the “stretch IRA?” What was it, and what happened to it?

Bear with me, as this can be a bit complicated. The taxation rules for non-spouse beneficiaries of individual retirement accounts mirror the arrangement for traditional account holders. Traditional account beneficiaries have to report this income. Distributions to Roth IRA beneficiaries are not subject to taxation; remember, the IRS got their taxes up-front there.

Beneficiaries of both types of accounts are required to take mandatory minimum distributions on an annual basis. The age of the beneficiary will determine the amount that must be taken each year. Younger beneficiaries can take less than their older counterparts.

What does that mean in practice? To stretch the individual retirement account (hence the name) and take maximum advantage of the tax benefits, the beneficiary would take only the minimum that is required for the maximum length of time. This was especially useful for beneficiaries of well-funded Roth accounts, as their distributions were tax-free.

A provision in the SECURE Act changed all of this. Beneficiaries have only a single decade to drain the account’s resources. Unfortunately, the long-term stretch has gone extinct.

We Are Here to Help!

Proper planning for an estate must consider a number of individual factors. The best course of action for you will depend heavily upon your individual circumstances, and informed legal guidance is key to successful outcomes.

Reach out to us if you’re ready to proceed. You can contact us by phone at 512-258-9455, or you can fill out our contact form if you’d rather send us a message. We’re happy to help!

Want to Learn More?

See our handy articles on estate planning mistakes, a comparison of trusts and wills, or our five top tips on estate planning!

  • Author
  • Recent Posts
Regina Slaton Schauer
Regina Slaton Schauer
Estate Planning Attorney at Slaton Schauer Law Firm, PLLC
Regina Slaton Schauer, has been practicing law for 25 years and is licensed to practice in Texas and Oklahoma. In addition to doing estate planning, her background includes being a Judge for eight years, working in a district attorney’s office and running two international programs where children were brought from orphanages and placed into loving American homes.
Regina Slaton Schauer
Latest posts by Regina Slaton Schauer (see all)
  • That Giving Feeling - February 20, 2023
  • Do I Trust You? Part III - February 16, 2023
  • Do I Trust You? Part II - February 15, 2023

Category: Estate PlanningTag: estate planning, IRA inheritance planning

Previous Post: «living trust You Should Use a Living Trust If… (5 reasons)
Next Post: Domestic Trusts – Are You “Qualified?” QDOT trust»

Footer

Our Law Office

Slaton Schauer Law Firm, PLLC

102 Raley Road

Cedar Park, Texas 78613

Phone: (512) 258-9455

See Map Get Directions

Office Hours

Monday 9:00 AM – 5:00 PM
Tuesday 9:00 AM – 5:00 PM
Wednesday 9:00 AM – 5:00 PM
Thursday 9:00 AM – 5:00 PM
Friday 9:00 AM – 5:00 PM

Join Free Newsletter

Sign up to get free resources, tips, and directory of our firm.

  • Email
  • Facebook
  • Instagram
  • LinkedIn
  • Pinterest
  • Twitter
  • YouTube
  • Privacy Policy
  • Disclaimer
  • Sitemap
  • Contact Us

Site Footer

Copyright © 2023 American Academy of Estate Planning Attorneys · All Rights Reserved