SOME HEIRS COULD FACE A TAX SQUEEZE

IRA owners should review their estate plan as a new law puts an end to stretch IRAs.

- MIRIAM CROSS

IF YOU PLAN TO LEAVE A HEFTY part of your IRA to your adult children, you may want to schedule an appointment with your estate planning attorney and your financial planner. Don’t be surprised if they’re booked up for a few weeks.

That’s because the Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law at the end of 2019, contains a worrisome provision for diligent savers and their heirs. Starting in 2020, non-spouse heirs who inherit IRAs or 401(k)s lose the ability to “stretch” their required minimum distributions (RMDs) from an inherited account over their own lifetime. Rather, they must drain the account within 10 years after the year of the owner’s death. That means losing what could be decades of taxfree growth, forcing larger withdrawals and potentially jacking up the beneficiary’s tax bills in what might be his or her prime earning years.