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“You could take little crumbs out, and let it grow tax-deferred over decades,” said Ed Slott, a certified public accountant and I.R.A. expert in Rockville Centre, N.Y. Required annual withdrawals were based on life expectancy, so the technique was especially helpful for young children or grandchildren, whose mandatory withdrawals would be quite small.
Now, heirs have just 10 years to drain an account.
"The law simply says you must take out the money after 10 years," notes Slott. "Your heirs could simply leave the Roth alone for 10 years and let the assets grow tax-free--and then take a lump sum. All that growth is tax-free, and it comes out tax-free," Slott adds.
The SECURE Act is the law for 2020 and beyond. Advisers are already scurrying to explain the retirement rule changes to clients, especially those with large IRAs who had planned on a stretch IRA for their heirs. We are receiving an avalanche of questions on exactly how and when this major change will be applied.