Posted by (American Life Insurance Guide 04/16/19 San Francisco News) The House Ways and Means Committee, which is in charge of U.S. national taxation, approved earlier this month the "SECURE Act". A provision in the bill will force the traditional tax-saving strategy called "Stretch IRA" to be suppressed.
What is Stretch IRA?
Stretch IRA, or sIRA for short, is one of the most advantageous ways for young heirs to inherit large accounts.
becauseIRA (Individual retirement account) Has tax advantages, and young heirs have more time to enjoy the tax advantages of the account, at the cost of having to withdraw a small part of the amount each year.
For example, under the current law, ifAmerican Life Insurance GuideThe reporter of is 22 years old and has inherited a $1 million IRA account from his elders as a beneficiary, so my RMD this year ( Rrequired Mminimum Distribution, the minimum withdrawal amount) is $16,400, or 1.64% of the account amount. RMD is subject to personal income tax.
At this time, we skipped 18 years. Assuming that I am 40 years old this year, how much money do I have to withdraw this year?Only 2.32% of the current IRA account amount.
Considering the account income in 18 years, it is not difficult to see that this method has both tax advantages and capital accumulation advantages.
The impact of the new bill on sIRA
Under the current legal system, if we inherit an elder’sIRA account, The law requires us to withdraw a minimum amount from the death of the elder.This amount is calculated according to our life expectancy at the time of inheritance.The House of Representatives version of the proposal requires mandatory completion within 10 years.The Senate version of the proposal requires that if the account amount exceeds $400,000 and the beneficiary is not a spouse, it must be withdrawn within 5 years. The common exemption point of these two proposals is to take care that the beneficiary is a spouse, and the beneficiary suffersDisability or chronic illnessCircumstances, the beneficiary is less than 10 years younger than the original account holder, or the minor children of the original account holder, etc.
Flexible strategies under the new bill
According to CNBC reports, if the proposal is passed, there are still some workarounds that will allow IRA account holders to pass on the account funds to non-spouse beneficiaries in a way that minimizes taxation.Charitable Remainder Trusts
Charitable surplus trust refers to a kind of charitable trust established by donors. Donors can use part of the trust proceeds for the life of the beneficiaries and transfer the remaining part to charitable organizations.Suzanne, chief tax strategist at Northern Trust, said: “This is suitable for groups who have the motivation to do charity, hope to pay the government at least taxes, and have a preference for the complexity of charitable trusts.” In specific practice. , You must treat the trust as the beneficiary of the IRA, but if you don’t do it correctly, this could become a tax minefield.If you are considering this route, be sure to coordinate with experienced professional accountants and estate planning lawyers.Life Insurance (Life Insurance)
"uselife insurance, You can circumvent any RMD and complexity and get more tax-free money because it directly bypasses the entire system. CNBC cited comments by Ed Slott, a financial planner in New York.The death benefit of a life insurance policy is exempt from the recipient’s overall income.
"If you have $100,000 in your IRA account, it's only $100,000," Snowt said. "But if you put $100,000 into life insurance, the death benefit may be worth $500,000."
Update on December 2019, 12: The SECURE ACT retirement bill was officially passed in Congress.
(American Life Insurance Guide Report)
appendix:01. "THE SETTING EVERY COMMUNITY UP FOR RETIREMENT ENHANCEMENT ACT OF 2019 (THE SECURE ACT)", 2019, https://bit.ly/2VOSMAH
