Regaining the IRA Stretch

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 has been overshadowed by the pandemic and the election. Many of the changes improved retirement security for numerous Americans. Long overdue reforms were passed to make retirement easier and more assessable.

The Act changed a variety of IRA rules:

  • Increases the IRA minimum required distribution age from 70.5 to 72
  • Lifts the age limit to contribute to an IRA has been lifted
  • Allows new parents to take penalty-free withdrawals
  • Makes long-term, part-time employees eligible for 401(k) plans
  • Inherited IRA distributions are now subject to a 10-year distribution limit

The new 10-year limit — which eliminates the IRA "stretch" feature — is problematic in retirement planning. Previously, an inherited IRA could be distributed ("stretched") using the life expectancy of the younger beneficiary.
There are exceptions to the new 10-year rule for:

  • The surviving spouse
  • A minor child
  • A disabled or chronically ill beneficiary
  • Beneficiaries who are less than 10 years younger than the original owner

But in the typical situation where the surviving spouse leaves the IRA to the next generation, the beneficiaries must receive the funds by the end of the 10th year after the date of death of the account owner. This could provide for the more immediate taxation of the proceeds than under the previous law.

For a charitably inclined client, several solutions are possible:

  • Designate one or more tax-exempt charities as beneficiary of the proceeds
  • Create a Testamentary Charitable Remainder Trust (CRT) or a Testamentary Charitable Gift Annuity (CGA). Both planned giving techniques provide income for the heirs and restore the “stretch” feature that the SECURE Act removed

A Testamentary Charitable Remainder Trust (CRT) would provide annual payments to individual beneficiaries for their lifetime or a set term of years, based on the value of the trust, and allows the donor to name one or multiple charities as remaindermen.

There are expenses in setting up the CRT as well as ongoing costs for the lifetime of the beneficiaries. Many advisors suggest using the CRT for IRAs of considerable value ($500,000 or more). CRTs also must meet IRS legal qualifications that can be affected by the age of the individual beneficiaries, so be sure to consult with legal counsel.

A Testamentary Charitable Gift Annuity (CGA) provides an annuity payment for a designated annuitant, in this case the intended beneficiary, for life. At the death of the annuitant, remaining funds go to the charity that issued the annuity.

The CGA has few if any costs and provides a steady income stream. The rate is determined by the annuitant’s age. (The American Heart Association, like most charities, uses the annuity rates published by the American Council on Gift Annuities.)

Due to the nature of the assets funding the CGA, the income will be taxable, much as IRA distributions would have been. The benefit is that the distributions would be spread out over the lifetime of the beneficiary, therefore restoring the “stretch.”

Each charity has its own set of rules, so be sure to contact the charity before proceeding to understand how best to satisfy its requirements. Many charities do not offer immediate annuities to an annuitant under age 65. In that case, a deferred annuity would be issued with payments to begin when the annuitant turns 65.

Generally, the charity would be named as the beneficiary of the IRA, and the owner of the IRA (the donor) and the charity would execute a Memorandum of Understanding outlining the desires of the owner. It's also advisable to include language in the donor’s will or trust instrument to accomplish the donor’s intentions.

We’re Here to Help. The American Heart Association has a team of advisors available throughout the U.S. to help you determine which options work best in your client’s situation as well as to provide detailed illustrations. We have suggested language to include in the donor’s will or trust. We will work with you to develop a Memorandum of Understanding with the donor that will outline the requirements on how the funds should be used.
Request our Smart Solutions brochure to help explain to your clients the benefits of lifetime income with CGAs.

For more personalized assistance, contact your American Heart Association Senior Advisor.


John Cullum

John W. Cullum, CFP®

Senior Advisor, Charitable Estate Planning
American Heart Association
[email protected]


Note: The entire SECURE Act can be read at

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