A few of President Obama’s Proposed Fiscal Year 2015 Budget Provisions

If you own a retirement account, you need to be aware of a few key retirement account provisions included in the President’s budget this year.  If passed into law your retirement account could be affected.

1) Harmonize the RMD Rules for Roth IRAs with Other Retirement Accounts: In other words, requiring ROTH IRAs to follow the same required minimum distribution (RMD) rules as other retirement accounts. For example, you would have to begin taking RMDs from your ROTH IRA when you turn 701/2, just like a traditional IRA. If this provision passes, there would be far fewer conversions from a traditional IRA into a ROTH IRA.

2) Create a 28% Maximum Benefit for Retirement Account Contributions: The maximum tax deduction for making contributions to a retirement plan, such as an IRA and 401(k), would be limited to 28%. This would affect those high-income taxpayers who would not receive a full tax deduction when making contributions to retirement accounts.

3) Mandatory 5-Year Rule for Non-Spouse Beneficiaries: Non-spouse beneficiaries would be required to deplete the inherited retirement account by the end of the fifth year after the year of the IRA owner’s death. Although the proposed provision calls for exceptions for disabled beneficiaries and minor children, it would eliminate the “stretch IRA.”

4) Allow Non-Spouse Beneficiaries to Make 60-Day Rollovers of Inherited Assets: This provision would allow non-spouse beneficiaries to move inherited retirement savings from one inherited retirement account to another inherited retirement account within a 60-day window. This could reduce the mistakes that are often made currently by the beneficiaries.

5) Eliminate RMDs If Your Cumulative Retirement Account Savings is $100,000 or less: The result here is that there would be no requirement to take RMDs if the account is under $100,000, and therefore no penalty would be assessed. This would eliminate the current 50% penalty that is assessed when RMDs are not properly taken.

It is important to keep in mind that many of these same provisions were in the President’s budget proposal from last year and nothing happened.  These changes would require an act of Congress and therefore these are more of a wish list for the President, unless Congress acts.

Why Choose Morris Hall:
You have a number of options when it comes to estate planning, so why pick Morris Hall?  First off, estate planning and asset protection are a very complicated endeavor and you should only trust someone who focuses exclusively on those matters.  Also, MH is a proud member of The American Academy of Estate Planning Attorneys (AAEPA) which provides us additional support, advanced training, tools and information that is not available to others – which means that we can better protect your assets and your loved ones.  We are one of only two firms in Arizona that belong to the AAEPA and are the only firm in that has been granted membership.  If you have assets and loved ones that you want to protect, you are in good hands with MH.  Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.