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Caring For Generations

Relaxed Rules for Retirement Plans Worth CARES-ing About

On Behalf of | May 13, 2020 | estate and tax planning, Estate Planning

The historic Coronavirus Aid, Relief, and Economic Security Act enacted into law March 27 of this year, “contains numerous tax provisons that will likely dominate the advice that financial advisors give to clients in the months ahead,” Richard J. Hindlian writes in Financial Advisor Magazine. Although, at Geyer Law, our attorneys offer no direct tax advice, clients’ estate and financial planning are both impacted by changes in tax law concerning contributions to – and withdrawals out of –IRA accounts….

The CARES Act is specifically designed to provide relief to taxpayers who have been directly – and financially – affected by COVID-19 due to:

  • the taxpayer, spouse or dependent was diagnosed with COVID-19
  • quarantine
  • furlough
  • layoff
  • closings
  • reductions in business income

There are 4 main ways in which the IRA “rulebook” has been relaxed:

1.  The 10% early distribution penalty (for withdrawals prior to age 59 ½) is waived. As much as $100,000 may be withdrawn from an IRA regardless of age (or 100% of the balance), provided that the withdrawal is for reasons related to COVID-19.

2.  The federal income tax payable on IRA withdrawals may be paid over a period as long as three years.

3.  Required Minimum Distributions are waived. The funds can remain in the IRA and not be taxed as income.

4.  The deadline for IRA contributions for 2019 is extended until July 15, 2020.

The CARES Act contains many other provisions that impact our estate planning clients at Geyer Law, some which offer new opportunities for family transfer of wealth. And, while many of the estate tax savings strategies that worked under the old law still make sense, it certainly makes sense to revisit your planning – the relaxed rules are definitely worth “CARES”-ing about!

– by Ronnie of the Rebecca W. Geyer blog team