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House Passes New Payout Rules for Inherited IRAs, Special Needs Trusts Protected

29.05.2019 by Law Firm of Seglund Gabe Pawlak & Groth in Elder Law, Estate Planning, Legal Updates

Last Thursday, the US House of Representatives passed House Resolution (“H.R.”) 1994, Setting Every Community Up for Retirement Enhancement Act (“SECURE”) of 2019, 417-3.

The bipartisan legislation has a range of retirement tax policy changes, including:

  • Requiring payout of most inherited IRAs within 10 years (Sec. 401)
  • Raising the required minimum distribution age to 72 (Sec. 114),
  • Making it easier for 401ks to offer commercial annuities (Sec. 204)

First-party and third-party special needs trusts (SNTs) would not be impacted by the new payout limits to inherited IRAs. Multiple exceptions to the new limits exist in the bill, including for individuals with disabilities. SNTs will not be subject to the new payout limits, as current regulations contained at 26 CFR 1.401(a)(9)-4 will still apply.

No Senate companion bill exists to H.R. 1994. However, many similar provisions are contained in H.R. 1007 and S. 972, both titled the Retirement Enhancement and Savings Act (RESA) of 2019. Importantly, key differences exist. For instance, in S. 972, Sec. 501, new payout limits for inherited IRAs would not apply unless the amounts exceeded $400,000. House passed H.R. 1994 has no such ceiling.

The timeline for passage in the Senate remains unclear, as does any ultimate agreement in this contentious political environment. However, there is a very strong bipartisan urge to pass a retirement tax package, an IRS reorganization, and an extension of temporary tax provisions, such as the lower medical expense deduction threshold, this year.

If you have any questions or would like to know more, please contact attorney Bruce R. Seglund at bseglund@michlaw.biz.

Seglund Gabe Pawlak & Groth, PLC
28345 Beck Road
Suite 301
Wixom, MI 48393
Phone: (248) 869-0030
Fax: (248) 869-0039
www.michlaw.biz

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