If you’ve earned your wealth the old-fashioned way – by inheriting it – beware.
And to raise your paranoia to the level where it should be, here are two new things to worry about.
The unpublicized dark side of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 would eliminate a big tax advantage for IRA beneficiaries. If it becomes law, the Act would require most non-spouse IRA and retirement plan beneficiaries to drain their inherited accounts within 10 years of the account owner’s death – which, given longer and longer life spans, is all too soon. It should be noted that the change would not affect account owners draining their accounts during their retirement years.
Another problem is that estate tax clawbacks could –well – fleece your heirs. The Tax Cuts and Jobs Act (TCJA) upped the unified federal gift and estate tax exemption drastically: from $5.49 million in 2017 to $11.4 million for this 2019, with inflation adjustments for 2020-2025. Yet the exemption is scheduled to revert back to the much-lower pre-TCJA level in 2026. Making big gifts while the TCJA’s ultra-generous exemption is still in place sounds like a tax-smart strategy. Doing nothing could be an altogether bad strategy. That said, the taxpayer-friendly proposed regulations encouraging the idea of making big gifts right now are only proposed rules at this stage; future events could ensure that they never take effect. Thus, place your bets, and act accordingly.
Finally, remember: you’re not paranoid if everybody truly is working against you.
For more information, please read:
Beware, the IRS is eyeing your inherited money | Market Watch