Insights + Resources

Inherited Accounts Under the CARES Act

Apr 29, 2020

Inherited IRA Under CARES ACT
How the CARES Act Impacts RMDs

Tucked into the gigantic “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act were two key changes you should know about, regarding required minimum distributions (RMDs). Both were designed to give people more control over their money and to help manage selling investments during an emergency.1

One provision allows retirees to forego taking RMDs from Individual Retirement Accounts (IRA) or 401(k)-style plans this year.

The other provision allows people who have inherited 401(k)s, IRAs or Roth IRAs to suspend distributions in 2020 (while RMDs don’t apply to people with Roth IRAs, they do apply to investors who inherit Roth accounts).

Let’s take a look at a couple of examples.

  • Let’s say an account holder has been taking RMDs from an inherited account for a number of years using the life-expectancy method set by the Internal Revenue Service.  The account holder can forgo a distribution in 2020, and resume distributions in 2021.
  • Suppose an account owner passed away on January 1, 2020, and left the IRA to an adult child. The new 10-year rule would start in 2021. The beneficiary would have until the end of the 10th year to withdraw the entire account.2

Important Note: If you have already taken a distribution from an IRA or 401(k)-style plan this year, you may be able to roll the funds back into the plan. But if you have already taken a distribution from an inherited IRA, you may not be allowed to put that money back. Keep in mind, the CARES Act is a 335-page bill, and some of the provisions are open to interpretation. Please contact your tax or legal professional to understand how it might impact your situation.

Big picture, these rule changes are meant to help Americans who may be struggling with the economic, emotional, or physical toll of COVID-19. In a tough time, these provisions of the CARES Act gives account owners some flexibility that may provide some relief. As always, please reach out if you have questions, we would welcome the opportunity to serve you.

Tags: , , ,

More Insights

A 6.1% Bump in Social Security?
Jul 22, 2021

The news keeps getting better for Social Security recipients. It’s now projected that benefits will increase 6.1% in 2022, up from the 4.7% forecast just two months ago. That would be the most significant increase since 1983.1,2

Coping with an Inheritance
Jul 21, 2021

Inheriting wealth can be a burden and a blessing. Even if you have an inclination that a family member may remember you in their last will and testament, there are many facets to the process of inheritance that you may not have considered. Here are some things you may want to keep in mind if … Continue reading “Coping with an Inheritance”

Billionaires and Space Travel
Jul 19, 2021

It’s long been an aspirational target for entrepreneurs. It literally goes beyond “blue sky,” in terms of location, to a place no business has gone before: Outer Space! The name of the game is commercial space travel.

The Quiet Fall in Bond Yields
Jul 16, 2021

With all the attention given to inflation, stock prices, and job reports, it’s been easy to overlook the remarkable move in the bond market during the past few months as bond yields have fallen. The yield on the 10-year treasury closed at 1.37% on Friday, July 9, down from its 2021 high of 1.74% in … Continue reading “The Quiet Fall in Bond Yields”

Oil Prices Hit Six-Year High
Jul 14, 2021

On July 6, oil prices reached a six-year high of $76.98 a barrel. This benchmark came as the Organization of the Petroleum Exporting Countries (OPEC) and allies failed to reach an agreement regarding an increase in production.1 This rise in cost follows a year in which OPEC and allies cut production amidst the COVID-19 pandemic. … Continue reading “Oil Prices Hit Six-Year High”

Insights + Resources >