• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to secondary sidebar
Home
About Us Contact Us Advertising
Articles
Budgeting Debt Frugal Insurance Investing Making Money Retirement Saving Money
Tips
Money Saving Tips Trash Audit
Make Money Forums Blogs
Create a Blog Control Panel All Entries All Blogs
Tools
Calculators Prescription Drug Coupons Online Savings Accounts Test Your Knowledge Financial Directory Credit Cards

SavingAdvice.com Blog

Bridging the gap between saving money and investing

Subscribe

 

Join Now or Login

  • Home
    • Advertising
  • Tips
    • Money Saving Tips
    • Recycle, Reuse and Repurpose
  • Make Money
  • Credit Score Guide
  • Forums
  • Blogs
    • Create a Blog
  • Tools
  • Financial Basics
    • Back to Basics: Saving Money
    • Back to Basics: Beginners Guide to Retirement
    • Back to Basics: What Every Child Under 10 Should Know About Personal Finance
    • Back to Financial Basics: Investing In Stocks

How the Secure Act Could Change Heir Rights

November 29, 2019 by Tamila McDonald

The Secure Act

The Secure Act has been languishing in the Senate for some time. However, that doesn’t mean it won’t pass and, if it does, it could have a significant impact on your retirement accounts. While many would consider the changes beneficial, others aren’t so sure. If approved, the Secure Act changes how inherited IRAs would be managed, and not everyone is thrilled about it.

How the Secure Act Changes Heir Rights

If the Secure Act goes into effect, it will fundamentally alter how non-spouse heirs of an IRA can handle the money. Under current law, a non-spouse beneficiary has the ability to stretch out over the course of their life expectancy the minimum required distributions; an approach often referred to as the “stretch IRA.”

The current approach allows more of the money to remain in the account, giving the IRA the ability to grow tax-deferred for longer. Plus, since the withdrawal sizes would potentially be smaller, it provides the heir with a chance to reduce their tax liability each year.

However, if the Secure Act becomes law, the stretch IRA method won’t be available. Instead, non-spouse heirs would have to empty the account within ten years. This means, for heirs who would usually have spread the withdrawals out over a longer period, they have to remove more money annually than they would under the old law. Since the withdrawals will be larger and are taxable, their tax burden goes up accordingly.

Plus, the increase in the heir’s tax bill might not just impact the withdrawals. It could also affect their earned income, making larger payments even more costly.

Estate Planning for the Secure Act

Since the Secure Act would alter non-spouse heir rights for IRA, it may fundamentally change how a person handles estate planning. The new rule could be a burden on the original IRA owner’s family, so they might choose a different tactic.

Under current law, younger heirs get a significant benefit. They can make smaller withdrawals over the course of their life, allowing them to benefit substantially from compounding. In some cases, it may make leaving an IRA to a child – say, to help fund a grandchild’s college education – a less viable option.

Not All Heirs Impacted

It is important to note that not all heirs would be impacted by the change. Aside from spouses, beneficiaries who are 10 years (or less) younger than the account holder, the minor child of the account holder, or are chronically ill or disabled aren’t affected by this part of the Secure Act (if it becomes law). However, an heir that falls into every other category would be, so account holders may choose to leave their IRA to another family member who would get the most benefit instead of the person they would prefer.

The Secure Act hasn’t passed yet, and it’s possible that it never will. But, by understanding how it can impact an inheritance, account holders can make plans now. That way, if the Secure Act becomes law, they can adjust their strategy if necessary.

 

Do changes to heir rights worry you? Why or why not? Share your thoughts in the comments below.

 

Read More:

  • How the Secure Act Affects Retirement Plans
  • Property Tax Bill Too High? Here’s How to Appeal
  • Guide to Charitable Deductions Under New Tax Laws

 

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

Tamila McDonald
Tamila McDonald

Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.

Reader Interactions

What did you think about this article?
1 Star2 Stars3 Stars4 Stars5 Stars (3 votes, average: 3.00 out of 5)
Loading...

Comments

    Leave a Reply Cancel reply

    Your email address will not be published. Required fields are marked *

    Primary Sidebar

    Secondary Sidebar

    • Articles
    • Tips
    • Make Money
    • Credit Score Guide
    • Forums
    • Blogs
    • Tools
    • About
    • Contact

    Subscribe to Our Newsletter
    Your subscription could not be saved. Please try again.
    Your subscription has been successful.
    Copyright © 2025 SavingAdvice.com. All Rights Reserved.
    • Privacy Policy