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Take another look at traditional IRAs during estate planning

It is never too early to start planning for the future. Whether thinking about retirement or estate planning, the sooner someone gets started, the better off he or she will likely be. Retirement plans also feature pretty prominently in many estate plans, too. People in Georgia often choose to name beneficiaries on their retirement accounts who will receive those benefits should they pass away before using everything. However, a new rule might affect some people’s prior estate planning choices.

It used to be common practice to leave one’s traditional IRA to children or even grandchildren, and then to leave other assets to spouses or partners. In 2019, the Setting Every Community Up for Retirement Enhancement Act passed and limited the window during which assets can be distributed to non-spouse beneficiaries to just 10 years. This means that someone might have named a beneficiary thinking that heir would receive assets for several decades, but the new rule change could limit him or her to a significantly smaller time frame.

Considering the new rule, a reversal of old advice might be in order. That is, it might be more prudent to leave a traditional IRA to a spouse while reserving other assets for different heirs. There are exceptions to the 10-year rule, though, so it might not be necessary to make changes if an heir is exempt from it, such as:

  • Siblings 10 or fewer years younger
  • Partners 10 or fewer years younger
  • People with disabilities

It is impossible to predict the future, but it is certainly possible to plan for it to the best of one’s ability. Estate planning allows one to designate heirs, address one’s last wishes and much more. The process can be confusing though, especially for those who are not familiar with Georgia state law. Securing the right guidance may prove helpful for creating the most comprehensive estate plan possible.

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