How the CARES Act Will Impact Required Minimum Distributions, Retirement Planning, and Estate Planning

by | General
Pile of CARES Act Buttons With US Flag, 3d illustration

We wanted to bring you some important updates about your retirement accounts and how you might be able to utilize these new developments in your long-term financial and estate planning.

  • Required Minimum Distributions in 2020: If you were expecting to have to take a required minimum distribution in 2020 because of your age or because you own an inherited IRA, you are in for good news. Under the Coronavirus Aid, Relief and Economic Security Act (CARES Act), you don’t have to take those required minimum distributions this year. If you have already taken a required minimum distribution in year 2020, there is a limited 60-day grace period to roll those contributions over. You should contact your financial advisor immediately if you would like to discuss not taking, or undoing, distributions in 2020.
  • Certain penalty free withdrawals from retirement: The CARES act also allows penalty free withdrawals from retirement accounts, up to $100,000.00. To qualify, either you or your spouse or a dependent must be diagnosed with Covid-19, OR you must experience adverse financial consequences as a result of layoffs, furloughs, reduced work hours, inability to work due to lack of childcare, or just lack of work based on the quarantine. If you qualify, any money you withdraw will still be treated as income for tax purposes but would not be subject to the additional tax or penalty that would otherwise apply to early withdrawals. There is also an option to repay the distribution within three years and be eligible to receive a refund on some or all of the income taxes you paid, although these circumstances are still a little unclear.
  • The Internal Revenue Service and the state Comptroller’s office have extended the filing deadlines for 2019 income tax returns to July 15,2020. The IRS has also extended the deadline for first quarter 2020 estimated taxes.

Now is the time to take advantage of these changes and to discuss if they can be used to help your family. This is also a time to recheck your estate plan to ensure it does what you really want it to do, and to make sure your documents match your planning goals.