What is All the Talk and Chatter About the New IRA Rules?

March 30, 2022

What is all the talk and chatter about the new IRA rules? Find out the new changes what you need to be aware of.

Full Transcript:

Hello, welcome to Arista Advice! Question of the week is: "Paul, what is all the talk and chatter about the new IRA rules?" Well, as you can imagine the Internal Revenue Code and the Department of Treasury has changed the rules again. Who would have figured?

Well, in the SECURE Act of 2019, Congress and the Senate and the House all voted to change the beneficiary designations, which is those who end up with the money when the owner passes away. There's three new classifications as you'll see here. They are the Eligible Designated Beneficiary, the Non-Eligible Designated Beneficiary, and the Non-Designated Beneficiary.

Let's discuss briefly these three classifications, so that you know how to protect your money and pay as little as you can in taxes. The first group of people - the Eligible Designated Beneficiaries are your surviving spouse, are the minor children, disabled, chronically ill, and children that are 10 years younger than the account owner of an IRA, a 403(b), a 401(k), or 457, or other qualified retirement plans, a SEP, a defined benefit, a cash balance. Lots of different accounts, all different buckets that people put money in in preparation for retirement, but if they pass away prematurely, it's important to know who gets this money.

The second classification is the Non-Eligible Designated Beneficiary. They are non-spouse beneficiaries that are more than 10 years younger than the decedent, and also, see-through trusts. This money gets paid out within a 10-year period. This is where all the chatter is going on with the IRS and the Department of Treasury right now of how soon that money has to be paid out. Stay tuned because there'll certainly be some court cases to determine this, and the third group of people is the Non-Designated Beneficiary. That is the estates, charities, and trusts that are not qualified as a Designated Beneficiaries, and these have to be paid out within five years.

Hope this has been helpful! May this be a reminder for you to look to see who the beneficiaries are on your beneficiary forms on a 401(k), a 403(b), a 457, a SEP, a SEP-IRA, a SIMPLE, any qualified retirement plan. The governing document overrules your will and your trust and any other document that you've made. It goes back to the beneficiary form, so go get those forms, check on them, keep them updated, and remember to live a life of significance.

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