Latest news with #SECUREAct
Yahoo
6 days ago
- Business
- Yahoo
The lowdown on inherited IRAs
Dear Liz: I inherited my mother's Roth IRA when she died in 2015 and have been taking yearly required minimum distributions based on my age. My spouse is my primary beneficiary on this inherited Roth IRA. What happens if I pass away before she does? Can she just roll it over into her existing Roth IRA, as is generally permitted for spousal IRA inheritance? Or are there additional limits imposed because it becomes a "doubly inherited" Roth IRA? Answer: The SECURE Act largely eliminated the so-called stretch IRA that allowed non-spouse beneficiaries to take distributions over their lifetimes. IRAs inherited on or after Jan. 1, 2020, must typically be drained within 10 years. That likely would be the case for your wife. Special rules allow a spouse to treat an inherited IRA as their own, but only when they inherit from the original IRA owner, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. There are a few exceptions. Your wife may be able to spread the distributions over her lifetime if she is disabled or chronically ill, for example. If that's not the case, she's back to draining the account within 10 years. Many inherited IRAs require annual distributions. Since this is a Roth IRA, however, the original owner would not have been required to start distributions. Therefore, the spouse of the inherited Roth IRA beneficiary does not have a requirement to distribute annually over the 10-year period but may wait until the end of the 10-year period to do the full distribution, Luscombe says. Dear Liz: I am in my late 50s, married and woefully unprepared financially for my later years. I was a stay-at-home mom for many years. I now work almost full time but my employer has no 401(k) or profit sharing or really any benefits at all. I just started putting $8,000 (the catch-up amount) into my Roth IRA. What else can I do now to make up for lost time? Answer: You can't really make up for the decades of compounded returns you missed by not investing earlier. But you can make some smart decisions now for a more comfortable retirement. Your most important decision likely will be how you and your spouse claim Social Security. Your spouse almost certainly should wait to claim until age 70 to maximize their lifetime benefit and to lock in the highest possible survivor benefit. If you outlive your spouse, this benefit could comprise the bulk of your income. Consider reading 'Get What's Yours,' a book about Social Security claiming strategies by Laurence J. Kotlikoff and Philip Moeller. Just make sure to get the updated version that was published in 2016, since earlier versions refer to strategies that Congress eliminated. Delaying retirement is another powerful way to compensate for a late start, since you'll have more years to work and save. Consider finding an employer who will help you secure your future by providing a 401(k) with a generous match. You'll be able to contribute substantially more to a workplace retirement plan than you would to a Roth. You and your spouse should consider hiring a fee-only financial planner to review your situation and offer customized advice. Dear Liz: You recently responded to an elderly couple who planned to move into assisted living, but were concerned about capital gains taxes on the sale of their home. You suggested an installment sale or renting out the home as possible options. While not for everyone, another possibility is a home loan or a reverse mortgage to cash out tax free. Answer: Reverse mortgages have to be repaid if the borrowers die, sell or permanently move out of their homes. If one of the spouses planned to stay in the home, a reverse mortgage might work, but not if both plan to move to assisted living. A home equity loan or home equity line of credit might be options if the couple have good credit, sufficient income to make the payments and a cooperative lender. A tax pro or a fee-only financial planner could help them assess their options. Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the "Contact" form at Sign up for our Wide Shot newsletter to get the latest entertainment business news, analysis and insights. This story originally appeared in Los Angeles Times.
Los Angeles Times
6 days ago
- Business
- Los Angeles Times
The lowdown on inherited IRAs
Dear Liz: I inherited my mother's Roth IRA when she died in 2015 and have been taking yearly required minimum distributions based on my age. My spouse is my primary beneficiary on this inherited Roth IRA. What happens if I pass away before she does? Can she just roll it over into her existing Roth IRA, as is generally permitted for spousal IRA inheritance? Or are there additional limits imposed because it becomes a 'doubly inherited' Roth IRA? Answer: The SECURE Act largely eliminated the so-called stretch IRA that allowed non-spouse beneficiaries to take distributions over their lifetimes. IRAs inherited on or after Jan. 1, 2020, must typically be drained within 10 years. That likely would be the case for your wife. Special rules allow a spouse to treat an inherited IRA as their own, but only when they inherit from the original IRA owner, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. There are a few exceptions. Your wife may be able to spread the distributions over her lifetime if she is disabled or chronically ill, for example. If that's not the case, she's back to draining the account within 10 years. Many inherited IRAs require annual distributions. Since this is a Roth IRA, however, the original owner would not have been required to start distributions. Therefore, the spouse of the inherited Roth IRA beneficiary does not have a requirement to distribute annually over the 10-year period but may wait until the end of the 10-year period to do the full distribution, Luscombe says. Dear Liz: I am in my late 50s, married and woefully unprepared financially for my later years. I was a stay-at-home mom for many years. I now work almost full time but my employer has no 401(k) or profit sharing or really any benefits at all. I just started putting $8,000 (the catch-up amount) into my Roth IRA. What else can I do now to make up for lost time? Answer: You can't really make up for the decades of compounded returns you missed by not investing earlier. But you can make some smart decisions now for a more comfortable retirement. Your most important decision likely will be how you and your spouse claim Social Security. Your spouse almost certainly should wait to claim until age 70 to maximize their lifetime benefit and to lock in the highest possible survivor benefit. If you outlive your spouse, this benefit could comprise the bulk of your income. Consider reading 'Get What's Yours,' a book about Social Security claiming strategies by Laurence J. Kotlikoff and Philip Moeller. Just make sure to get the updated version that was published in 2016, since earlier versions refer to strategies that Congress eliminated. Delaying retirement is another powerful way to compensate for a late start, since you'll have more years to work and save. Consider finding an employer who will help you secure your future by providing a 401(k) with a generous match. You'll be able to contribute substantially more to a workplace retirement plan than you would to a Roth. You and your spouse should consider hiring a fee-only financial planner to review your situation and offer customized advice. Dear Liz: You recently responded to an elderly couple who planned to move into assisted living, but were concerned about capital gains taxes on the sale of their home. You suggested an installment sale or renting out the home as possible options. While not for everyone, another possibility is a home loan or a reverse mortgage to cash out tax free. Answer: Reverse mortgages have to be repaid if the borrowers die, sell or permanently move out of their homes. If one of the spouses planned to stay in the home, a reverse mortgage might work, but not if both plan to move to assisted living. A home equity loan or home equity line of credit might be options if the couple have good credit, sufficient income to make the payments and a cooperative lender. A tax pro or a fee-only financial planner could help them assess their options. Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the 'Contact' form at
Yahoo
23-04-2025
- Business
- Yahoo
'I Have 3 Children That Will Inherit My 401(k). How Is The RMD Completed?' Here's What Suze Orman Says
If you're planning to pass down a 401(k) to your children, you're not alone. Many retirees want to ensure their hard-earned savings benefit the next generation. But when it comes to required minimum distributions, the process can get a little complicated — especially if there are multiple non-spouse beneficiaries. Suze Orman recently addressed a listener's question about this very topic on her "Women & Money" podcast. Here's what you need to know if your kids are set to inherit your 401(k). Don't Miss: 'Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. The average American couple has saved this much money for retirement —? Orman stressed the importance of one crucial action: "Just make sure that if the money is still in a 401(k) when you die, that they do inherited IRAs at a brokerage firm," she said. Why? A 401(k) may have limited distribution options, whereas an inherited IRA allows for more flexible withdrawal strategies. Each child would open their own inherited IRA, and the 401(k) would be split accordingly. From there, the rules for RMDs kick in. According to Orman, how the RMD is calculated depends on whether your children qualify as eligible designated beneficiaries. Under IRS rules, most adult children are considered non-eligible designated beneficiaries — meaning they must follow the 10-year rule. Trending: It's no wonder Jeff Bezos holds over $250 million in art — This rule was introduced under the SECURE Act. It requires non-eligible beneficiaries to withdraw the entire account balance within 10 years of the original owner's death. However, Fidelity explains that if the owner of the account passes away after their RMDs have started, their beneficiaries may also have to take annual RMDs based on the owner's remaining life expectancy. In other words, they can't just wait 10 years and cash out the entire account all at once — unless you died before RMDs began. If you had already started taking RMDs, your children may need to continue them annually, then fully distribute the account by the end of year 10. Not all beneficiaries are treated the same. If one of your children is still a minor at the time of inheritance, the rules shift slightly. According to Fidelity, minor children can take distributions based on life expectancy until they turn 21. After that, the 10-year rule applies, meaning they'd need to fully withdraw the remaining funds by age not directly related to RMDs, Orman used the opportunity to share a planning tip: "You really want to save your beneficiaries a whole lot of trouble — just do a Roth retirement account." Inherited Roth IRAs are still subject to the 10-year rule, but distributions are tax-free as long as the account was open for at least five years, and there's no RMD during the 10 years. If you have multiple children who will inherit your 401(k), it's wise to make a plan now. Talk to a financial advisor or tax professional about converting to a Roth, setting up inherited IRAs, and making sure your beneficiaries understand the 10-year distribution rule. A little planning today could save your family a lot of confusion — and taxes — in the future. Read Next:Deloitte's fastest-growing software company partners with Amazon, Walmart & Target – Image: Shutterstock Up Next: Transform your trading with Benzinga Edge's one-of-a-kind market trade ideas and tools. Click now to access unique insights that can set you ahead in today's competitive market. Get the latest stock analysis from Benzinga? APPLE (AAPL): Free Stock Analysis Report TESLA (TSLA): Free Stock Analysis Report This article 'I Have 3 Children That Will Inherit My 401(k). How Is The RMD Completed?' Here's What Suze Orman Says originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved. Sign in to access your portfolio
Los Angeles Times
19-03-2025
- Business
- Los Angeles Times
The SECURE Act 2.0 Presents Key Differences Over 1.0 Version – Do You Need To Modify a Trust?
The Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law in 2019, brought significant changes to retirement account distribution rules. The subsequent passage of SECURE Act 2.0 in December 2022 further expanded and refined these regulations, impacting individual retirement accounts (IRAs), employer-sponsored plans, and estate planning strategies. A crucial aspect of these legislative changes is the impact on trusts named as beneficiaries of retirement accounts. This article compares SECURE Act 2.0 to prior law and explains why trusts that were designed before its enactment must be modified to align with the new legal framework. Prior to the SECURE Act, trusts were often structured as 'conduit trusts' or 'accumulation trusts' to take advantage of the stretch IRA provisions, allowing RMDs to be distributed gradually over the beneficiary's lifetime. However, under the SECURE Act's 10-year rule, these trusts may no longer function as intended, leading to unintended tax consequences and administrative issues. The SECURE Act 2.0 continues to reshape retirement and estate planning. Trusts that were structured before these changes may no longer align with the new distribution rules, potentially causing unintended tax burdens and limiting beneficiary protections. Anyone with a trust as the beneficiary of a retirement account should review and modify their estate plan with a qualified professional to ensure compliance with the latest laws and optimize tax efficiency. By understanding the nuances of SECURE Act 2.0 and adjusting trust provisions accordingly, individuals can better protect their assets, reduce tax exposure and ensure a smoother transition of wealth to future generations.
Yahoo
02-03-2025
- Business
- Yahoo
There's only 1 place in America with an estate tax that hits fortunes of as little as $1M
Wealthy Americans are well aware of the taxes they face when passing their money to the next generation. The federal estate tax – applied to the transfer of property after death – only affects estates worth more than $13.99 million. In fact, only about 0.14% of decedents (or about 4,000 out of 2.8 million deaths) were expected to pay any estate tax in 2022, according to the Tax Policy Center. Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Home prices in America could fly through the roof in 2025 — here's the big reason why and how to take full advantage (with as little as $10) With such a high threshold, you'd think only the ultra-rich need to worry about estate taxes. Right? Not if you live in Oregon, which taxes estates as small as $1 million, making it the state with the lowest estate tax exemption in the country. Now, lawmakers are reconsidering that limit, with one state representative even calling Oregon the 'most frightening place to die.' So what's happening in the Beaver State, and how can you protect your estate from excessive taxation? Even if your estate avoids federal estate taxes, your heirs could still face an unexpected tax burden. Thanks to the SECURE Act, most beneficiaries of inherited retirement accounts – such as 401(k)s and IRAs – must withdraw the entire balance within 10 years. This means large, taxable distributions that could push them into a higher tax bracket. You worked hard to build wealth for your family, but taxes don't end when you pass away. Between estate taxes and income taxes on inherited accounts, your heirs could see a significant chunk of your legacy go to the IRS. In addition to federal estate taxes, 12 states and the District of Columbia impose their own. In Oregon, that threshold is just $1 million – a figure that doesn't go as far as it used to. Consider this: the average home price in Oregon is nearly $500,000, per Zillow. When you add up real estate, retirement accounts, life insurance, and savings, it's not hard to hit that $1 million mark – triggering an estate tax bill for your loved ones. Republican Rep. Bobby Levy told 'The Oregonian' that the state has become 'the most frightening place to die.' She co-sponsored a bill to raise the estate tax threshold to $7 million, bringing it in line with New York and Maine. Supporters argue that Oregon's low threshold is driving retirees out of the state, as families look for more tax-friendly places to protect their wealth. Read more: Jamie Dimon issues a warning about the US stock market — says prices are 'kind of inflated.' Crashproof your portfolio with these 3 rock-solid strategies 'Given that Oregon's population has remained stagnant over the past four years at roughly 4.2 million, we should be thoughtful about how to attract and retain older people who are in their prime professional and philanthropic years,' said libertarian think tank Cascade Policy Institute's president & CEO John A. Charles, Jr. 'How many retirees are moving to Nevada, Idaho, or California – states with no estate tax – just to protect their children's inheritance?' asked GOP Rep. Kevin Mannix. "We have paid our fair share of property, gas and other taxes to the state. This archaic and unfair estate tax (money grab) must have the threshold raised to reasonable 2024 standards or legislators should eliminate it as many other states have," wrote one reader of "The Oregonian" to its editor. There are ways that Americans can avoid estate taxes. Gift your assets: The IRS allows you to gift up to $19,000 per recipient, per year, tax-free. This means you can gradually transfer wealth to your heirs without triggering estate taxes, helping to stabilize their tax bracket over time. Establish trusts: There are several types of trusts that can help you avoid a tax liability. Irrevocable trusts transfer assets out of your estate, making those funds no longer considered part of your estate and not liable to estate taxes. Credit shelter: Another option is a credit shelter trust, which allows the surviving spouse of a married couple to pass the estate to beneficiaries tax-free upon their own death. Make sure to consult a tax advisor before establishing a bypass trust. Consider relocation: Most states do not impose estate taxes on top of the federal tax. Connecticut has the highest threshold for exemption at $13.99 million. Oregon, Washington and Massachusetts have low thresholds at $1 million to $2 million. Keep in mind that while most states do not have estate taxes, they may impose inheritance taxes. Cybercrime cost Americans $12.5 billion in 2023 — how to avoid becoming another scam statistic 'I like this stuff': Self-made $500M mogul and YouTuber reveals his 'essential' US portfolio that he says Amazon 'can't hurt' — here's his secret formula and how you can copy it in 2025 These 5 money moves will boost you up America's net worth ladder in 2025 — and you can complete each step within minutes. Here's how This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Sign in to access your portfolio
