IRA Estate Planning: 5 Important Facts

IRA estate planning

If you are like most people that take retirement planning seriously, you are contributing to an individual retirement account. The idea is to be able to draw from these resources when you put your working years behind you, but what if you do not need the money?

Under these circumstances, your account could be part of your estate plan, and this is why IRA estate planning is relevant. The exact details will vary depending on the type of account that it is, and there are two of them that are widely utilized.

Traditional vs. Roth IRA

One of these is the traditional individual retirement account, and the other one is the Roth IRA. The major difference between these two accounts is the way that taxes are paid.

Contributions into a traditional account are pretax contributions, so withdrawals are subject to regular income taxes. The Roth variety works in the opposite manner. You put money into the account after taxes have been paid, and as a result, distributions are not subject to taxation.

Now that we have shared the basics, we can move on to look at five important facts that you should know about these accounts and what they mean for IRA estate planning.

Penalty-Free Distribution Age

The idea is for these accounts to be used when you attain senior citizen status. As a result, you are penalized if you withdraw money from your traditional individual retirement account before you are 59.5 years of age.

There are a few exceptions to this rule. You can take money out of the account to pay medical bills or school tuition, and you can withdraw up to $10,000 to help finance a first home purchase.

Roth account holders can extract portions of the principal at any time, but they have to wait until they are 59.5 years old to access the earnings in a penalty-free manner.

Required Minimum Distributions

Since the Internal Revenue Service wants to get some money before you pass away, there is a minimum distribution requirement for traditional account holders. You have to start receiving these distributions when you are 73 years old.

Distributions are never required when you have a Roth account. Yes, the purpose of the requirement is to give the IRS an opportunity to start collecting taxes, but Roth account holders have already paid them.


At the end of 2019, the SECURE Act was enacted. It changed some of the individual retirement account parameters. We stated above that the required minimum distribution age for a traditional account is 73; it was 70.2 before the first SECURE Act raised it to 72.

Another change allows a traditional account holder to continue to contribute to the account indefinitely. This was always the case with Roth accounts. However, before the SECURE Act, traditional account holders had to stop contributing when they reached the mandatory distribution age.

SECURE Act 2.0

Another individual retirement account reform bill informally called SECURE Act 2.0 was enacted late in 2022. It increased the required minimum distribution age for traditional account holders to 73 in 2023, and it will eventually go up to 75.

Employers are now required to enroll all eligible employees into their 401(k) plans, and employees have the ability to opt-out. Another change allows employers to provide retirement account matches of student loan payments that are made by their employees.

Rules for IRA Beneficiaries

Since we are ultimately looking at IRA inheritance planning, we have saved the most significant part for last. If you leave either type of individual retirement account to your spouse, they could either roll it over into their own account or title it as an inherited account and assume the beneficiary role.

For non-spouse beneficiaries, the inheritor would be required to take minimum distributions for both types of accounts. They would be taxable for traditional beneficiaries, and Roth IRA beneficiaries would not pay taxes on their IRA income.

Another change that came about due to the SECURE Act is not a good one from an estate planning perspective. Before it was enacted, an individual retirement account beneficiary could stretch the distributions out for any period of time to maximize the tax benefits.

This was especially useful for Roth account beneficiaries. Now, all of the resources must be cleared out of the account within 10 years.

Schedule a Consultation Today!

We are here to help if you have questions about IRA estate planning or are ready to work with a Knoxville, FL estate planning lawyer to put a plan in place. You can call us at 305-456-3255 to schedule a consultation appointment, and you can use our contact form if you would rather send us a message.

Author Bio

Justin Stivers is the founder and managing attorney of Stivers Law, an estate planning firm specializing in wills, probate, trust administration, and financial risk management services. Justin’s approach goes beyond just creating legal documents. From aligning investments with estate plans to ensuring comprehensive insurance coverage, he safeguards a client’s legacy from unforeseen circumstances. His commitment extends beyond individual transactions, fostering lifelong partnerships to provide ongoing support and guidance.

With an impressive track record, Justin is licensed by the Florida and the Tennessee State Bars. His professional portfolio boasts Series 65 registration as a Registered Investment Advisor, the Wealth Management Specialistâ„¢ designation, and a 2-15 License for Health, Life, and Annuities. His dedication to excellence has earned him positions like Board Member of the Estate Planning Council of Greater Miami, Business Eagle Member of the Florida Justice Association, and active membership in esteemed organizations like the American Academy of Estate Planning Attorneys.

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