Due to the IRS’ new regulations, your clients may be hit with a huge tax bill they didn’t expect.

If you plan correctly, you have the opportunity to help clients avoid a massive tax hit.

That’s because the IRS just issued final regulations about required minimum distributions.

The News in Summary
The announcement is called TD 10001; RIN:1545-BP82, and it runs 260 pages!

We’ll summarize the most important points for you and your client below.

After this regulation is passed, when an IRA or 401(k) plan owner who is receiving distributions dies, the IRA or 401(k) plan must be distributed according to:

1. the distribution schedule that was in effect for the plan owner (i.e. the RMDs the plan owner would have had to take if he or she survived), and
2. whatever is left must come out at the end of 10 years.

For plan owners who have not had to start RMDs, the plan has to be taken to zero by the end of ten years, but annual payments are not required.

These changes take effect January 1, 2025.

The exceptions that were included in the Secure act (for surviving spouse, disabled heirs, and similar) remain.

So What?
If you have clients with a large retirement plan, when the clients die, those retirement plans are subject to a huge tax. That’s because the rules require that those plans be paid out, and taxed at high ordinary income rates, at the faster of the existing RMD rate and at the end of 10 years.

But there is a solution.

It’s called a StretchIRA Trust.

Here’s how it works. During life, your client sets up a StretchIRA Trust and names it as the beneficiary of the IRA or 401(k).

During life, the trust is completely changeable. Your client has total control and flexibility.

When the client dies, the IRA or 401(k) pays into the trust. That completely satisfies the Secure Act requirements.

But there is no income tax, because the StretchIRA Trust is tax-exempt.

The client can name whomever they want as beneficiaries.

Typically, a client will first name a spouse, and then the client’s children, and then the client’s grandchildren.

The process is very simple and cost effective. There’s a single setup charge. And then no fees for the remainder of the client’s life.

Advisor Benefit
Advisors benefit by:

1. helping the client solve an important problem
2. keeping the family’s assets intact, instead of up to 40% or 50% disappearing into taxes
3. retaining the assets even after the client dies.

To learn more, please click here for our Advisor Guide, or call to request it at 703 437 9720, or email us at [email protected].