How can I protect inheritances from SECURE Act withdrawals?


Q. When the Congress changed the rules for IRAs with the SECURE Act, it really messed up my financial plan, or the plan I thought I had for my kids. I wanted them to be able to inherit the account and make it last so there would still be money for my grandkids to inherit. Is there any way to help to preserve the tax-deferred nature of these accounts?
— Dad

A. You’re right that the SECURE Act, which was passed in 2019, made significant changes to inherited IRAs.

It especially affected those planning to “stretch” the distributions from inherited IRAs through a beneficiary’s lifetime.

Currently, most types of designated beneficiaries must distribute funds from the inherited IRA within 10 years after the death of the original owner, said Deva Panambur, a fee-only planner with Sarsi, LLC in West New York.

He said the only exception is for designated beneficiaries who are spouses, minor children of the owner of the account, disabled people, chronically ill people and people not more than 10 years younger than the owner.

These “Eligible Designated Beneficiaries” can stretch distributions from inherited retirement accounts, beginning in the year after the death of the owner, and calculated using their Single Life Expectancy table published by the IRS, he said.

“Spouses have a few other favorable options such as rolling the funds into their own IRA account and beginning the Required Minimum Distributions (RMD) when they turn 73, if they are the sole beneficiary of the IRA account, or rolling the funds into an inherited IRA and beginning the RMD in the year when the decedent would have turned 73,” he said.

There are several other nuances to these post-SECURE act rules, for example, the distinction that’s made depending on whether the decedent was already taking the RMD or not, he said.

Panambur said non-designated beneficiaries, such as the owner’s estate, charities and certain trusts, will need to either distribute the funds within five years of the death of the owner or, if the owner had already started the RMD, will continue using the owner’s life expectancy.

“These rules make estate planning very important and offer opportunities for optimizing tax efficiency depending on the specific details of the case,” he said. “For example, if you would like to leave money to several beneficiaries some of whom are eligible beneficiaries and some others who are not, you will want to leave certain retirement accounts to any eligible beneficiaries who have favorable terms, as compared to other beneficiaries who do not have those favorable terms.”

For traditional IRA accounts, you could reduce the tax impact by spreading the distributed funds to several non-eligible beneficiaries or by considering the expected tax brackets of the beneficiaries to plan accordingly, he said.

“Once inherited, the beneficiaries also have opportunities to reduce taxes,” he said. “For example, in certain cases, ineligible designated beneficiaries can time the distributions from the inherited IRA depending on their expected income and tax bracket.”

Given the many intricacies here, you may want to speak to a financial advisor or an estate planning attorney who can take a look at your long-term plan and advise accordingly.

Email your questions to .

This story was originally published on March 7, 2023. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.