Did you know that an IRA trust, if not properly structured, could become a disaster in terms of estate planning? Congress is currently considering eliminating the stretch IRA, which means that your financial advisors and estate planning professionals will need to rethink IRA trust estate planning.
On May 23rd, the new SECURE Act was passed by the House. One of the most important components of this bill is that it contains a provision that would eliminate the stretch IRA and instead implement a 10 year payout for most beneficiaries who are not a spouse, including a trust. Current use of a stretch IRA allows beneficiaries to extend distributions from individual retirement accounts they have inherited over the course of their lifetimes.
Congress has long been under the belief that retirement accounts are not estate planning vehicles and therefore, it is no surprise that the senate is currently reviewing its own bill which could reduce beneficiary payouts to only five years. If this bill is passed in full, those people who are most likely to be affected will be those with the biggest IRAs.
Those with the highest amount of money inside their IRAs are more than likely to name a trust as a beneficiary in order to manage the distribution of assets inside. There are two different types of IRA trusts currently. Schedule a consultation with a California estate planning lawyer if you suspect that you are using one of these and need further assistance.