Inherited IRAs and the Elimination of the Stretch IRA rule

With the passage of the SECURE Act, the ability of a non-spouse beneficiary to spread out taxable distributions over their lifetimes after the death of an IRA owner or retirement plan participant (often referred to as the “stretch IRA” rule) was eliminated. The new law, however, generally requires any beneficiary who is more than 10 years younger than the account owner to liquidate the account within 10 years of the account owner’s death unless the beneficiary is a spouse, a disabled or chronically ill individual, or a minor child until they reach the age of majority. It’s up to you to figure out how much you want to take in each of the 10 years, but you have to take all the withdrawals by end of the 10th year. Taxes definitely play into this decision as you pay ordinary income taxes on the full amount of the inheritance, so talk to us and/or your tax professional about what’s best for you.