The Secure Act and Beneficiary IRAs

In December 2019, new retirement legislation was put forth and approved that would require beneficiaries of inherited IRAs to withdraw the money within 10 years.  Under previous legislation, the beneficiary of an inherited IRA could choose to only take the required minimum distribution over their own life expectancy, possibly over 20-40 years depending on the recipient’s age i.e. “stretch IRA”, rather than taking all of the money within the first five years in the case where a trust was the named beneficiary.  However, this tax-advantaged “stretch IRA” possibility was removed with the Secure act, and therefore will allow beneficiaries only ten years to remove all the money from the inherited IRAs, regardless of tax consequences as payments received from the inherited IRA will be taxed at the beneficiary’s ordinary income tax rate.