Bill Seeks to Eliminate Stretch IRA
Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee has added a provision to The Highway Investment, Job Creation and Economic Growth Act of 2012 that will reduce the value of inherited IRAs, commonly referred to as stretch IRAs by no longer permitting tax deferred stretches of IRAs for beneficiaries other than a spouse, minor children or the disabled. Others, such as adult children, would only be permitted a five-year window to defer. The provision would require beneficiaries to pay taxes on inherited IRAs over five years instead of spreading them over their lifetime. If passed, the provision would apply to deaths after Dec. 31, 2012. During the markup of the bill, Baucus said that “IRAs are intended for retirement,” adding that IRAs are being “used by some taxpayers to give tax-free benefits” to future generations.While many in the financial industry are mobilizing to stop the efforts of Sen. Baucus, stay tuned. If this passes it will have major implications on how we plan for retirement accounts.