Estate Planning, Retirement Plans & The CARES Act (Part 2): COVID-19 Related Planning Opportunities

In addition to the suspension of required minimum distributions (RMDs) for 2020 available to retirement account owners as a result of the federal CARES Act that we discussed in our last post, this COVID-19 relief legislation also provided some additional relief efforts to help retirement account owners. First, retirement plan owners who were directly affected by the COVID-19 pandemic may take an IRA distribution this year of up to $100,000 and spread the income tax on that distribution out over 3 years (2020, 2021 and 2022). Also, if you are under 59.5 years of age and impacted by the COVID-19 pandemic, you can avoid the 10% penalty on early withdrawals. These relief provisions have created some interesting, albeit aggressive tax planning opportunities with IRAs. One possible, but aggressive strategy, is for an IRA owner to do a Roth IRA conversion and spread the income tax cost of the converted amount (up to $100,000) over 3 years. Another aggressive strategy is for an IRA owner directly impacted by the COVID-19 pandemic to make a deductible IRA contribution in 2020, then take a taxable distribution from the IRA this year. The deduction for the contribution is taken in 2020, but the taxes on the distribution can be spread out over 3 years. Although these strategies appear to comply with the CARES Act provisions, whether or not Congress intended to allow such strategies as part of this COVID-19 relief legislation has been a matter of some debate, and future IRS guidance on these strategies may be forthcoming. To learn more on how the CARES Act may impact your estate and retirement plan planning, please contact us today.

ESTATE PLANNING IN THE AGE OF COVID-19: An Introduction To Estate Planning

Join our Director of Estate Planning, Thomas E. Shea, Esquire, and Delaware Attorney, Darlene Blythe, Esquire, for an introduction to Estate Planning, and why COVID-19 has brought the importance of estate planning to the forefront.

  • What is an Estate Plan, what is the purpose, and who needs one?
  • The basic elements of an Estate Plan
  • What you need to do to get the process started
  • Advanced Estate Planning

Darlene Blythe & Thomas Shea - Webinar on ESTATE PLANNING IN THE AGE OF COVID-19: An Introduction To Estate Planning

Estate Planning, Retirement Plans & The CARES Act (Part 1): Elimination of RMDs

Did you know that the federal CARES Act that became law earlier this year as part of the federal government’s COVID-19 relief efforts included a number of short-term changes designed to enhance the durability of retirement plan savings as well as emergency provisions to ease COVID-19 related hardships. Specifically, the CARES Act suspended all required minimum distributions (RMDs) for 2020 (you can still take them if you want to or need to but are not required to take your RMD in 2020). As RMDs are based on retirement account values as of the end of the prior year, this relief provision may be helpful to those with retirement plans who have other sufficient sources of income and do not need to take RMDs and who may want to give their retirement plan funds time to recover from the current market volatility. This suspension of RMDs for 2020 may also create opportunities for those considering converting their traditional IRA to a Roth IRA. If you already took out an RMD for 2020, you may be able to return the RMD to your plan or other retirement plan, but under current IRS guidance you must act by August 31, 2020. We will cover additional CARES Act provisions impacting retirement plans in future posts. To learn more on how the CARES ACT may impact your estate and retirement plan planning, please contact us today.

IRA Rollover Relief – Deadline Extended

On June 23, 2020, the IRS released Notice 2020-51, which provides guidance relating to the waiver of 2020 required minimum distributions (RMDs) enacted as part of the federal CARES Act COVID-19 relief legislation.

Specifically, Notice 2020-51, allows for a rollover or repayment of an RMD taken in 2020 until August 31, 2020, effectively extending the traditional 60-day rollover rule for RMDs taken earlier in the year. Those plan owners who took RMDs this year thinking they were required to, but do not need the funds, have the opportunity to return those funds to their IRA or a rollover IRA. Consult with your plan custodian or financial advisor for more information. To learn more on the importance of estate planning in the age of COVID-19, please contact us today.