Dear Clients and Friends,

We extend our continued hope that you and your families are well.

In this halting economy brought on by COVID-19, we would like to keep you abreast of important changesthe federal governmenthas madein response.As we previously advised you, The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. In an effort to address this tenuous economic environment, CARES has, among other things, lifted some of the restrictionson the usage of retirement assetsfor “qualified individuals”who are retirement plan participants or IRA owners.A “qualified individual” under CARES is defined as an individual or business owner (including spouses and dependents of individuals and business owners)that have been diagnosed with COVID-19 or experienced financial hardship as a result of a mandated quarantine, a change in work status, (i.e., being laid off or furloughed, a reduced work hour schedule or an inability to work due to child care relatedissues). Below, we have outlined some of the key changes applicable to retirement asset distribution under the CARES Act.

1. Early Withdrawals

Under CARES, distributions to an individual who has not yet attained the age of 59 and a half from an IRA or qualified retirement plan like a 401K isnot subject to theten percent early distribution penaltyfor amounts up to $100,000 (up from $50,000) for the period of March 27, 2020 through December 31, 2020. This distribution is not subject to the mandatory federal twenty percent withholding, but payment of the tax must be made within a three-year period, beginning on the date the distribution was taken. Repayment can be made to the IRA or other qualified pension plan over the same three-yeartax repayment periodto avoid some or allof the taxes. To the extent such an early distribution is repaid within this three year period, the repaid monies will not be taxed (until dispersed in the customary course of retirement benefit distribution) and will not count toward the maximum contribution limit for the year(s) that the funds are recontributed because these repayments are considered to be rollover eligible distribution.

2. Loans

CARES has increased the amount a plan participant or IRA owner may take as a loan from such account up to the lesser of $100,000 (up from $50,000) of a vested account balance or one hundred percent(up from fifty percent) of the nonforfeitable value of the participant’s account. It does bear noting, however, that loans can only be taken if authorized by the terms of a plan. Typically, loans taken from retirement accounts arerepaid over a five-year period through payroll deductions, but CARES extended this period an additional year, with the hope that this will provide some relief to struggling Americans.

3. Required Minimum Distribution

Under CARES, 2020 Required Minimum Distributions (RMDS) can still be taken but are no longer required. Inherited IRAs do appear to be included in this waiver, especially when you consider the purpose behind the CARES Act, to lessen financial hardship caused by COVID-19. It bears noting that in order to qualify for Medicaid, RMDS for 2020 must still be taken.

Individuals who already took an RMD for the year 2020 may be able to roll over the distribution to an IRA or an eligible retirement account within sixty days of the date of distribution. However, this does not apply to inherited IRAs.

4. Market Recovery

When deciding whether to take your 2020 RMD (or rolling over a 2020 distribution), we recommend that consideration be given to the benefit of allowing retirement funds to recover from the changeable market and uncertain economy. Roth conversion should, as well, be considered when the market is low. If the market rebounds after the Roth conversion, you will get your Roth IRA at a bargain rate.

5. 2019 Contributions to IRAS and Qualified Retirement Plans

CARES also extended the time to contribute to IRAs and qualified retirement plans to July 15, 2020.

Click here to set an appointment date and time to discuss how the CARES Act effects your estate plan and any related tax implications by Zoom web conference, FaceTime, or telephone conference.

---

60 Crossways Park Dr. W., Suite 301 Woodbury, NY 11797

www.inheritlawyers.com