What Are the Exceptions to the SECURE Act?

The most important exception to the SECURE Act is that the law does not apply to IRAs that you leave to your surviving spouse. Your surviving spouse can still make a trustee-to-trustee transfer or a rollover of your IRA to her IRA—there is no change from the old law.

One surprising exception to the SECURE Act 10-year provision applies to non-spousal heirs who are not more than 10 years younger than the original IRA owner. This exception would most likely apply if you were to leave an IRA to a sibling or an unmarried partner. If you leave an IRA to your brother (who is not more than 10 years younger than you), your brother will be able to stretch or defer taxable distributions of the Inherited IRA over his lifetime.

The SECURE Act includes an exception for children while they are still considered minors according to the law of the state in which they live. They also receive more favorable treatment. Once the minor children reach their majority, however, the 10-year clock starts ticking. The age of the majority in Pennsylvania is 18. At this time, it is unclear, but the exception may also extend to children enrolled in school and under age 26.

Disabled and chronically ill beneficiaries are also exempt from the onerous distribution provisions of the SECURE Act. (Please read the extended footnote in Chapter 4 on page 61 for a description of who qualifies for the designation of disabled or chronically ill. Fair warning, if you don’t like Congress now, your hatred will grow when you read the stringent requirements to be considered disabled.)

Finally, a critically important exception that IRA owners should know about is that charitable trusts will not be subject to the ten-year income tax acceleration of the SECURE Act. We have done the math and charitable trust planning could become one of the great defenses to the SECURE Act and should be strongly considered by many IRA owners, even if you aren’t charitably inclined.

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