New IRS Regulations for Retirement Accounts after SECURE Act

The IRS recently issued proposed regulations regarding the treatment of tax-deferred retirement accounts after the SECURE Act of 2019. 

Here are 2 highlights relevant to estate planning:The age of majority will be defined as age 21.  This means that a minor child of the deceased account owner may elect stretch IRA treatment for pay-out of required minimum distributions until age 21 and then use the usual 10-year liquidation rule until age 31. 

The 10-year liquidation rule will require a beneficiary to take required minimum distributions based on the beneficiary's life expectancy during the 10-year liquidation period if the deceased account owner had reached his or her required beginning date (age 72).  Previously, it was assumed that no distributions would be required until the end of year 10 in all cases.  But now this prior assumption would only apply if the deceased account owner had not reached his or her required beginning date.  It should be noted that a Roth IRA does not have a required beginning date, so this interpretation only applies to traditional IRAs. 

Another note:  these are proposed regulations, not final.  The final regulations may differ from the proposed regulations.

Originally posted March 24, 2022