COVID-19 and the ensuing pandemic certainly overshadowed many important changes to our lives – we now all have worries ranging from toilet paper shortages to health crises, loss of loved ones, livelihoods, educations, etc. We’ve been forced to reassess how we budget, socialize, invest – even think.
One of many changes that affected a large number of Americans was the SECURE Act of 2019, which became effective January 1. 2020. Maybe not surprisingly, many older adults aren’t familiar with it, even though it’s been in effect for more than a year. The SECURE Act makes a couple notable changes in the rules regarding Required Minimum Distributions (RMDs) from IRAs. First, the “stretch” capability for beneficiaries inheriting IRAs was eliminated, and a new 10-year payout requirement was put in its place. This means that beneficiaries can take whatever they want from an inherited IRA account, as long as the entire account is emptied by the end of the tenth year after the original owner’s death. Second, it changed the age at which the RMD first applies from 70 ½ to 72.
Also note that last year, in response to COVID-19, the CARES Act waived required minimum distributions for 2020, but be aware that RMDs are back on for 2021. As a result, anyone age 72 or older as of December 31, 2021, will be required to take their RMD by the end of the year to avoid hefty penalties.
For many Americans, IRAs are the nest egg that we put away to ensure that we can not only live comfortably in retirement, but also have funds to help pay for expenses if we get ill, to ensure a spouse is cared for, and if properly protected, that there is a legacy to leave on to children and other loved ones. Proper estate plans, prepared by an Elder Law attorney, are an essential part of this idea; without them, we leave everything to chance. If you have not yet done your estate plan or have a plan that you’d like to have reviewed to ensure you are fully protected, give us a call today.