Tax Insights for 2024 – Secure Act 2.0 Phase-Ins
Expands Spousal Options for Inherited Retirement Accounts
Permits the surviving spouse (if he/she is the sole designated IRA beneficiary) to treat themselves as the deceased spouse for RMD purposes:
• Expands the options for surviving spouses to either treat the account as their own, roll it over into their preexisting IRA, remain a beneficiary but with special treatment, or now be treated as the deceased spouse
• Spouses inheriting an IRA from a younger spouse may delay RMDs until the decedent’s required beginning date and use the Uniform Life Table instead of Single Life Table to calculate RMDs
• If the inheriting spouse then passes away prior to RMDs commencing, beneficiaries are treated as original beneficiaries and can stretch RMDs over their lifetime
• Impact: Offers flexibility to optimize the transition of retirement assets to a surviving spouse
Increases Qualified Charitable Distributions from IRAs
Qualified Charitable Distributions (QCDs) will index for inflation starting in 2024:
• QCD tax benefits are available to those age 70.5 and older
• The maximum eligible amount for a QCD rises to $105,000 in 2024 from $100,000
• Similarly, the one-time opportunity to use a QCD to fund $50,000 into a split interest entity like a Charitable Remainder Unit Trust (CRUT), Charitable Remainder Annuity Trust (CRAT), or Charitable Gift Annuity (CGA) increases to $53,000 in 2024
• Impact: Affords the charitably inclined the ability to increase IRA QCD amounts over time in line with inflation
Conditions that must be met:
• The 529 plan must have been maintained for 15 years or more
• The Roth IRA receiving the funds must be in the name of the 529 plan beneficiary
• The rollover amount cannot include funds contributed to the 529 plan less than five years before the rollover
• The annual limit for transfers is the IRA contribution limit less any traditional IRA or Roth IRA contributions made for the year (e.g. In 2024, clients may transfer/ contribute up to $7,000)
• Rollovers limited to a lifetime maximum of $35,000 per beneficiary
• Impact: Provides beneficiaries access to the valuable benefits of a Roth IRA and to some degree, lessens the worry of overfunding a 529 plan