Retirement planning nowadays has fundamentally shifted. In the wake of the SECURE Act, a stretch IRA strategy is no longer as important. At one time, stretch IRAs were a major engine powering generational wealth transfer, however that has all but vanished for most non-spouse beneficiaries.

This article explores alternative strategies under SECURE 2.0 that tax professionals must now master, including Roth conversions, charitable trusts, and life insurance solutions to help clients navigate the newest rules.

 Table of Contents

  1. Understanding the SECURE Act’s 10-year rule for inherited IRAs
  2. Who still qualifies for stretch IRA treatment?
  3. Strategic distribution planning under the 10-year rule
  4. Risks and benefits of Roth conversion strategies to mitigate inherited IRA tax burdens
  5. Risks and benefits of life insurance as a stretch IRA alternative
  6. Risks and benefits of trust strategies in the post-stretch IRA era
  7. Key 401(k) changes in SECURE 2.0 affecting tax planning
  8. Delivering greater value through comprehensive tax planning

Key takeaways

Understanding the SECURE Act’s 10-year rule for inherited IRAs

The 10-year rule lies at the heart of SECURE Act changes. This provision fundamentally alters how most non-spouse beneficiaries must handle inherited IRAs. The days of taking minimal distributions stretched across decades are long gone. Instead, these accounts must now be completely emptied within a decade of the original owner’s death.

The tax challenge

Larger withdrawals often push beneficiaries into higher income brackets, potentially losing a significant portion of their inheritance due to accelerated taxation. Additionally, the timing requirements vary in complexity depending on when the original owner died relative to their required beginning date (RBD) for taking Required Minimum Distributions (RMDs).

For IRAs inherited after 2019, where the original owner died after reaching their RBD, beneficiaries face a strict annual distribution schedule. Here, heirs must take yearly distributions based on their life expectancy for years one through nine, with any remaining balance withdrawn in year ten.

By contrast, if the original owner dies before their RBD period, beneficiaries gain considerable flexibility in timing their withdrawals—provided they empty the account by the end of year ten.

The rigidity of these rules demands careful attention. Because of the complexity, a misstep or oversight in distribution timing can trigger penalties and squander value opportunities for tax-advantaged withdrawal strategies.

Who still qualifies for stretch IRA treatment?

A select group can still benefit from stretch IRA treatment. Surviving spouses have privileged treatment. They can either treat the inherited IRA as their own—continuing to make contributions and following standard RMD rules—or take distributions across their lifetime through an inherited IRA arrangement.

Beyond spouses, the law carves out exceptions for other “eligible designated beneficiaries.” This category includes individuals with disabilities or chronic illnesses, as well as those not more than a decade younger than the deceased account owner. These beneficiaries can continue using their life expectancy to calculate distributions, preserving much of the tax advantage that stretch IRAs historically provided.

The rules create a special temporary provision for minor children of the original account owner. These young beneficiaries can use stretch provisions until they reach age 21, at which point the 10-year countdown begins for any remaining funds. This hybrid approach attempts to balance the policy goals of the SECURE Act with the unique needs of young heirs.

Strategic distribution planning under the 10-year rule

A middle-aged couple sits on their living room sofa using a tablet and smartphone—representing retirees or beneficiaries exploring digital tools and strategies to manage inherited IRAs and reduce taxes under SECURE Act 2.0.

Adhering to these compressed distribution timelines requires careful planning. The beneficiary’s current and projected income must be carefully mapped against potential distribution strategies to find the sweet spot for tax efficiency and practical cash flow needs.

For inherited traditional IRAs, the stakes are particularly high. Some beneficiaries might benefit from equal annual distributions to smooth out the tax impact, while others could minimize their tax burden by timing larger withdrawals during years of unemployment or lower income. To complete this analysis properly, advisors must account for federal tax brackets, state tax implications, and the potential impact on other income-based benefits or surcharges.

Inherited Roth IRAs offer a welcome contrast in flexibility. Since qualified distributions remain tax-free, beneficiaries typically benefit most by letting these accounts grow untouched until year ten. This strategy maximizes the tax-free growth potential within the account.

The July 2024 IRS regulations brought long-awaited clarity to distribution requirements. Yet they also included relief provisions for IRAs inherited between 2020 and 2023, acknowledging the complexity of these transitions. This regulatory guidance helps financial advisors craft more confident distribution strategies while avoiding unnecessary penalties.

Risks and benefits of Roth conversion strategies to mitigate inherited IRA tax burdens

Roth conversions have emerged as a powerful tool in the post-stretch IRA era. Advisors can further reshape the tax situation for future beneficiaries by converting traditional IRA assets to Roth status during the original owner’s lifetime, especially for those subject to the 10-year rule.

Who is the ideal candidate for this strategy?

Someone currently in a lower tax bracket than their anticipated beneficiaries is a solid candidate for this approach, but timing matters immensely. Since post-death Roth conversions are not possible, the window for executing this strategy closes permanently at the original owner’s death.

As Roth conversions may carry risks and benefits, a methodical approach is often best. Rather than converting large sums at once, strategic partial conversions spread across multiple years may help manage the tax burden, while steadily building tax-free inheritance assets. 

This approach requires careful coordination with other income sources and deductions to optimize each year’s tax situation.

Risks and benefits of charitable giving alternatives for tax-efficient legacy planning

Qualified Charitable Distributions (QCDs) have gained renewed importance in tax-efficient legacy planning. For 2025, IRA owners aged 70½ or older can direct up to $108,000 to qualified charities, satisfying their RMD requirements without triggering taxable income. This strategy becomes particularly powerful when coordinated with broader estate planning.

The expansion of QCD options carries benefits and drawbacks. QCD opens new doors for giving, as a notable bill provision now permits a one-time QCD of up to $54,000 to charitable remainder trusts, or charitable gift annuities. This allows donors to create lasting charitable legacies while securing income streams for their heirs.

QCDs do come with restrictions. They can’t be directed to donor-advised funds or private foundations, and once the gift is made, it’s irrevocable. Missteps in execution may also cause the withdrawal to be treated as taxable income.

Still, QCDs can stand out for their ability—when executed correctly—to merge charitable intent, tax efficiency, and family support. 

Risks and benefits of life insurance as a stretch IRA alternative

Life insurance is a creative solution to the loss of stretch IRA benefits. When strategically redirecting RMDs to fund life insurance policies, clients can create tax-free death benefits that entirely sidestep the 10-year-rule’s compressed taxation timeline.

This approach often yields surprisingly advantageous results. A carefully structured life insurance strategy has the potential to deliver more after-tax wealth to beneficiaries than they would have received through an inherited IRA, even if that IRA had retained its stretch provisions. The key lies in leveraging the tax-free nature of life insurance death benefits against the inevitable taxation of inherited IRA distributions.

An irrevocable life insurance trust (ILIT) brings another dimension. When properly designed, an ILIT can provide beneficiaries with tax-free income streams that extend beyond the SECURE Act’s 10-year limit.

This approach does have drawbacks, though. Leveraging life insurance, particularly through an irrevocable trust such as an ILIT, means the grantor relinquishes all control over the policy and its assets. Future modifications generally must be executed by the trustee, which limits flexibility in adapting the plan to future needs

It comes down to expert advice for each family’s situation. Some forward-thinking advisors are using a ‘double-impact’ approach to combine life insurance and charitable remainder trusts in a way that maximizes benefits for both heirs and charitable causes.

Risks and benefits of trust strategies in the post-stretch IRA era

The elimination of stretch IRAs has forced us to fundamentally rethink trust-based inheritance planning. Conduit trusts, once a reliable vehicle for controlling distributions while maintaining stretch provisions, now face the same compressed 10-year distribution timelines. This acceleration potentially undermines their asset protection benefits and distribution control mechanisms.

With these developments, accumulation trusts have gained new relevance. Because trustees can retain IRA distributions within the trust structure, these trusts preserve greater distribution control. However, this flexibility comes at a cost; trust tax rates reach the highest marginal rate.

Standalone retirement trusts, specifically drafted to handle inherited retirement assets, offer perhaps the most sophisticated solution. These specialized vehicles can incorporate provisions that address concerns about beneficiary spending, while navigating the technical requirements of the 10-year rule. For instance, a properly structured standalone retirement trust might include provisions for education, healthcare, or other specific needs while maintaining overall distribution discipline.

Leveraging trusts has its downsides though. Although they allow IRA distributions to remain within the trust for longer, the retained funds are taxed at the trust’s compressed (and often very high income) tax rates, with the highest bracket at 37%. 

The most effective solution is usually a combined approach of Roth conversion planning and other strategies. This integrated approach balances tax efficiency, asset protection, and distribution control.

Key 401(k) changes in SECURE 2.0 affecting tax planning

A man with a backpack looks out a window, evoking a sense of reflection and planning—symbolic of individuals reevaluating their retirement and inheritance strategies in response to changes brought by the SECURE Act 2.0.

SECURE 2.0 introduces several transformative changes to 401(k) rules that create new planning opportunities. Perhaps most notably, catch-up contribution limits for participants ages 60-63 will increase, offering a longer window of tax-deferred savings.

A significant change lies ahead for 2026, when high-income earners (those making over $145,000) must direct their catch-up contributions to Roth accounts. While this change eliminates immediate tax deductions, it creates opportunities for tax-free growth and withdrawals in retirement. See our comprehensive tax advisory services for specialized guidance on navigating these changes.

For younger workers, the act’s provision for employer matching of student loan payments is a significant innovation win. This allows employees to build retirement savings while addressing education debt, encouraging younger workers to begin saving. It effectively doubles the impact of their student loan payments through employer matching contributions.

Perhaps even more intriguing are the new rules permitting 529-to-Roth IRA rollovers (up to $35,000 lifetime) This provision offers a solution for parents who may have over-saved in 529 college savings plans, allowing them to repurpose those funds for retirement while maintaining tax advantages.

Delivering greater value through comprehensive tax planning

The demise of stretch IRAs, while challenging, has created an unprecedented opportunity for tax advisors to demonstrate their expertise and value. When advisors master the intricate interplay of these creative and convoluted strategies, they can potentially save their clients tens or even hundreds of thousands in unnecessary taxes.

Every client’s situation demands a personalized combination of solutions. Some may benefit most from aggressive Roth conversion strategies, while others might find optimal results through a combination of life insurance, and charitable giving techniques. Through analyzing, combining, and customizing these approaches, advisors can aim to deliver superior client outcomes and strive to elevate the advisory relationship beyond traditional planning constraints.

Unlock your potential as a tax advisor—get started with Harness today.

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