Secure ACT and EDB | Ed Slott and Company, LLC

Secure ACT and EDB

The Secure Act states that an individual that is not more than 10 years younger than the IRA owner can stretch out distributions. It doesn't mention a older beneficiary that is within 10 years of the owner. So it would seem to say that if the IRA owner is 65, dies in 2020 and named a non spouse beneficiary that is 68. The bene would have to deplete the account in 10 years and would NOT get the stretch option.

Not correct. Since any beneficiary older than the decedent cannot be more than 10 years younger, they are an EDB and can use the life expectancy stretch as before. 

When I converted my 401k to Roth in 2009, I paid the IRS a lot of money and planned for my grandchildren to utilize the stretch option over many years.  When the IRS eliminated the stretch for Roths (which were not mentioned in the Secure act), the are depriving my family of a huge amount of money that would have been paid out over their lifetimes.  Can I sue the IRS for breach of contract since I bought the stretch and they are now taking it away???

The IRS did not introduce the stretch limitation, it was Congress when they passed the Secure Act. The Secure Act expanded many retirement plan options for participants, but they "paid for" the cost of those expansions by restricting the stretch to 10 years (except for those who qualify for exceptions referred to as "eligible designated beneficiaries" or EDBs. The precursor for this was the Clark v Rameker Supreme Court decision of 2014 that ruled that inherited retirement accounts will not have creditor protection in bankruptcy because these accounts are only retirement accounts for the participant, not their beneficiaries. While some states have provided creditor protection for inherited IRAs since, the only relief allowed for the 10 year drawdown is to qualify as an EDB. In other words, if your grandchild is disabled or chronically ill, they still qualify for the life expectancy stretch.  Still, many people are understandably unhappy about these recent developments.  You would be wasting your money to sue politicians, but you can let them know how you feel. Check to see if your Congressional Rep voted for the Secure Act. Almost all did.

Alan, I don't believe you meant to suggest that the beginning of the 10-year drawdown period for a non-disabled minor grandchild is deferred either to majority or completion of secondary education.  The SECURE Act clearly makes that deferral available only to children of the IRA owner.

Yes, you are correct. I will edit minor's  limited stretch out of the post.

If you live until the grandchildren are at least 27, you could leave your IRA to them in charitable remainder trusts, which would replicate the stretch.  See my article on this in the April 2020 issue of Trusts & Estates: . 


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