The rich can probably escape new laws on inherited IRAs. But the rest of us can't.

[mahatmakanejeeves]

From Allan Sloan. He's a good financial writer. I can't understand half of what he says, but then again, I'm not a CPA.

Business • Perspective

The rich can probably escape new laws on inherited IRAs. But the rest of us can’t.

By Allan Sloan
Columnist
Feb. 14, 2020 at 8:00 a.m. EST

If you’ve got tons of money in your Individual Retirement Accounts, you can probably buy your way around the new rules for inherited IRAs. But if you’ve got merely pounds of IRA money, you’ve gotten sandbagged. ... No one is shouting this from the rooftops, of course. But it’s the logical — and distasteful — conclusion that you reach if, like me, you’ve taken a look at ways to get around the new laws that limit the life of bequeathed IRAs to 10 years if you give them to anyone but a surviving spouse or sick or disabled beneficiaries.

Before this year started, you could bequeath your IRAs to anyone you wanted. The recipient had to take “required minimum distributions” every year — but those distributions — which are taxable — were stretched out based on the recipient’s presumed life span. The younger the recipient, the smaller the distributions the inheritor had to take.

[The Secure Act is exposing the ugly truth about people’s hatred of paying taxes]

You can see why estate planners loved these “stretch IRAs.” IRA holders could pass on assets to people two or three generations younger, no muss, no fuss, no estate tax. ... Under the new rules — which took effect Jan. 1, less than two weeks after the Secure Act became law — stretch IRAs for non-spouses were pretty much eliminated. ... However, if you’ve got the money and the incentive, you can probably create what I call a “synthetic stretch IRA.” For example, you can set up a trust to which you bequeath your IRA, with the trust instructed to pay lifetime income to whomever you choose on whatever terms you like.

I’m sure there are other, less obvious workarounds, all of which — at least for now — are high-cost and possibly legally risky. But over time, I’m sure, specialists will find loopholes for their clients’ IRAs to squeeze through. ... People with tons of money — let’s call them the rich — will be able to afford to play the games required to create synthetic stretch IRAs. People with pounds of money — the middle class and upper-middle class — won’t be able to play.

{snip}

Allan Sloan
Allan Sloan is a columnist for The Washington Post. He is a seven-time winner of the Loeb Award, business journalism's highest honor.

[econ 101]

1. BS it depends on how the regualtions are written.

They can be written to be effective like the consumer financial protection agency's or like the Dodd-Frank.