Are There Any Exceptions to the Death of the Stretch IRA Legislation?

What Are the Exceptions to the Death of the Stretch IRA Legislation?

Death of the Stretch IRA Who is Excluded From the Five Year Rule James Lange IRA Expert

If you’ve been following my blog, you know that the Senate Finance committee has voted 26 0 to eliminate the Stretch IRA. The idea makes sense – the billions of dollars they’d make in tax revenue would help the new administration pay for promises made on the campaign trail. I believe that it will pass, and so I wanted to spend a little bit of time today and discuss the exceptions to the proposed new Inherited IRA rules.

If there is any good news in this mess that Congress has dumped on us, it is the fact that they have protected your spouse from the new rules affecting Inherited IRAs. So everything that you read in Retire Secure! about taking minimum distributions from your spouse’s retirement plans still holds true. If you die and leave all of your IRA money to your spouse, she can still stretch it over the course of her lifetime. But don’t get too comfortable, because the new rules have a catch. Even though she can still stretch your IRA, it might not be the best idea to leave your spouse all of your money – a concept that is so complicated that I’ll have to devote an entire future post to it.

Some beneficiaries can still benefit from Stretch IRAs

Disabled and chronically ill individuals are excluded from the new rules, as are beneficiaries who are not more than ten years younger than you – such as siblings or an unmarried partner. The privilege isn’t extended to their beneficiaries. Once they die, their own beneficiaries will have to pay taxes according to the new rules. Minors are also excluded from the five year rule, but only while they are minors. Once they reach the age of majority – which varies depending on which state they live in – they have to pay accelerated taxes according to the new rules. This could open up a Pandora’s Box of problems during their college years, because the distributions they’d have to take from the inherited IRA could make them ineligible for any type of financial aid!

Charities and Charitable Remainder Unitrusts (CRUTS) are also excluded from the five year rule. This exception can provide some planning opportunities for the right individuals, but it’s also a topic so complicated that I’m going to devote an entire future blog post to it as well.

Current proposal about Stretch IRAs offers some protection with an exclusion

The other interesting news is that the proposed new rules give each IRA owner a $450,000 exclusion – meaning that their beneficiaries can exclude (and therefore, continue to stretch) a certain portion of the account. Granted, they may change this amount, but as it stands now, you have nothing to worry about if the total IRA balance in your family is less than $450,000. If you have a $1 million IRA, your beneficiaries will be able to stretch $450,000 but will have to pay accelerated taxes on $550,000. The exclusion has to be prorated between all of your retirement accounts – including Roths. And while distributions from Roth accounts aren’t taxable, the greater damage is that your beneficiaries will lose the benefit of the future tax free growth. You can’t even choose which of your beneficiaries gets to use the exclusion – it’s prorated between your beneficiaries!

These new rules for Inherited IRAs will be an administrative headache for all of your beneficiaries. The exceptions to the rules, however, provide planning opportunities that if possible, you should take advantage of while both you and your spouse are alive. I encourage you to watch the short video attached to this post, and stop back soon to learn more about the things you can do now to minimize the effects of this devastating legislation.


For more information on this topic, please visit our Death of the Stretch IRA resource.



New Social Security Rule Will Hurt Women by Eliminating Benefits Options

James Lange, CPA/Attorney, Advises Married Couples Ages 62-70 to Apply and Suspend NOW. After April 29, 2016, it will be too late!

In early November, President Obama signed the Bipartisan Budget Act of 2015 into law and the repercussions are devastating to the married women of our country.

Pittsburgh – December 16, 2015Lange Financial Group, James Lange, Pittsburgh, Social SecurityMarried women, statistically the widows of the future, will pay a high price due to the changes that the Bipartisan Budget Act of 2015 has made to Social Security. Pittsburgh attorney and CPA James Lange takes action by releasing audio and video presentations as well as transcripts and a report that will help couples ages 62-70 navigate this new rule and protect their benefits while they still can!


The financial well-being of widows is often dependent upon the choices that are made while their spouses are still alive. Spousal and survivor Social Security benefit choices can mean the difference between living comfortably in retirement and falling under the poverty line for women whose spouses leave them behind. Widows are commonly younger than their deceased husbands and the Social Security benefits they have earned, especially in the Boomer generation, are commonly less than that of their deceased husbands. This means that a widow will depend on collecting survivor benefits, often for many years, based on the benefits to which their deceased spouses were entitled.

“One of the best things a husband can do to protect his wife in widowhood is to maximize his own Social Security benefits. One technique that we use with our clients is apply & suspend.” James Lange of Pittsburgh-based, Lange Financial Group, LLC comments. “The law prior to the Bipartisan Act allowed the husband to apply for, and then suspend collection of his benefits, while allowing his wife to collect a spousal benefit. It was a win-win for our clients!”

This technique was used strategically to maximize the husband’s and wife’s long-term benefits. That, unfortunately, is coming to an end, with the exception of certain couples who take the appropriate action between now and April 29, 2016. For many couples, the income stream from spousal benefits in the previously allowed apply and suspend technique made it possible (or at least more palatable) for the husband to wait until age 70 to collect Social Security, thus maximizing their benefits.

“This new law cuts off that income stream, making it if not impossible, at least more difficult, for husbands to choose to delay collection of their benefits.” Lange warns, “Unfortunately, it is the widows of these husbands who cannot maximize their Social Security benefits who will be left in reduced circumstances for the rest of their lives.”


DO NOT WAIT. Congress has eliminated one of the best Social Security maximization strategies. Fortunately, some recipients may be grandfathered already and others could be grandfathered if they act between now and April 29, 2016. Others will have to make do with the new laws. In either case, now is the time to review your options. We have posted a one hour audio with a written transcript explaining the old law, the new law and the transition rules. Readers can go to to access this audio and transcript.

ABOUT JAMES LANGE Jim Lange, Pittsburgh, Social Security

James Lange, CPA/Attorney is a nationally-known Roth IRA and retirement plan distribution expert. He’s also the best-selling author of three editions of Retire Secure! and The Roth Revolution: Pay Taxes Once and Never Again. He hosts a bi-weekly financial radio show, The Lange Money Hour, where he has welcomed numerous guests over the years including top experts in the fields of Social Security, IRAs, and investments.

With over 30 years of experience, Jim and his team have drafted over 2,000 wills and trusts with a focus on flexibility and meeting the unique needs of each client.

Jim’s recommendations have appeared 35 times in The Wall Street Journal, 23 times in the Pittsburgh Post-Gazette, The New York Times, Newsweek, Money magazine, Smart Money and Reader’s Digest. His articles have appeared in The Journal of Retirement Planning, Financial Planning, The Tax Adviser (AICPA), and other top publications. Most recently he has had two peer-reviewed articles published on Social Security maximization in the prestigious Trusts & Estates magazine.

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