How The Secure Act Has Modified Legacy Planning - and
how do you stop your heirs from losing out?
Tuesday, July 21, 2020
By David Schlossberg, Tax Plan for Wealth, Inc
Under the prior rules, before the Secure Act existed, was the stretch IRA and stretch Roth IRA. It was a wonderful world where IRAs inherited by younger generations could enjoy tax advantaged growth for the lifetime of your heir.
IRA assets (including Roth IRA assets throughout this discussion) that are inherited are generally protected assets in most states. That usually meant that if your child inherited your IRA assets and was sued for any reason, the funds retained in the IRAs and not distributed would typically be protected from that lawsuit₁. This also applied to family related lawsuits such as a divorce action. Retained IRA assets inherited by your child would typically not be deemed a marital asset subject to division. In other words – your future ex-in-law isn’t entitled, and it would be preserved for your child.
₁ Qualified beneficiaries may also treat a distribution as a CRD; however, nonspousal beneficiaries are not permitted to recontribute funds, as they would not otherwise be eligible for a rollover.
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