Coronavirus CARES Act Impacts Seniors and Estate Planning
Signed into law on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act is a $2 trillion economic relief package Congress passed to help Americans deal with the devastating financial impact of the coronavirus pandemic. This Coronavirus relief contains some provisions that will affect seniors and their estate planning. In addition to authorizing direct payments to most Americans, including seniors, the law also changes required retirement plan distributions for this year and includes Medicare-related provisions.
Do I Need to File Taxes for 2018 to Receive My Coronavirus Check from the IRS?
The CARES Act provides a one-time direct payment of $1,200 to individuals earning less than $75,000 per year ($150,000 for couples who file jointly), including Social Security beneficiaries. Payments are based on either 2018 or 2019 tax returns. The IRS has issued guidance, stating that anyone who did not file a 2018 tax return will need to file a simple tax return in order to receive the payment. After getting complaints that the requirement to file a tax return would be burdensome on seniors, the IRS announced that it would automatically send Social Security beneficiaries their stimulus check without their having to file a tax return. Social Security beneficiaries who receive direct deposit will get their checks directly in their bank accounts. The IRS will mail other beneficiaries a check, which may take longer than the direct deposit. Read our post SSI Recipients to Get $1,200 Emergency COVID-19 Automatically Deposited for more details.
Coronavirus Affects Estate Planning by way of Retirement Plans
The CARES Act also affects retirement plans. Recognizing that the stock market crash has depleted many retirement plan accounts, the Act waives the requirement that individuals over a certain age take required minimum distributions from their non-Roth IRAs and 401(k)s in 2020. This includes any 2019 distributions that would otherwise have to be taken in 2020. Required minimum distributions for this year would be based on the value of the account at the end of 2019, when the account likely had more money in it. Waiving required minimum distributions will allow retirees to retain more of their savings.
Coronavirus Hardship Withdrawals without Penalty
In addition, the CARES Act allows individuals adversely affected by the pandemic to make hardship withdrawals of up to $100,000 from retirement plans this year without paying the 10 percent penalty that individuals under age 59 ½ are usually required to pay. (Covered in our post Must Read: Three Ways Coronavirus Relief Changes Retirement Account Tax Rules) Individuals who use this option will still have to pay income taxes on the withdrawals, although the tax burden can be spread out over three years. The dollar limit on loans from retirement plans is also increased until the end of the year.
Coronavirus Provision for Medicare Beneficiaries
Finally, the Act includes small but potentially important provisions for Medicare beneficiaries. While the Centers for Disease Control has been advising people to have a three-month's supply of needed medications on hand during the coronavirus crisis, many Medicare Part D plans limit the amount beneficiaries may order. The CARES Act requires that during the crisis Part D plans must lift these restrictions. Also, when a vaccine against COVID-19 is finally developed, it will be available to Medicare beneficiaries as part of Medicare, not Part D, and there will be no cost to beneficiaries.
Estate Planning Attorney in Avon Lake
At Joseph L. Motta, elder law and estate planning firm in Avon Lake, OH, we know the coronavirus pandemic has caused a substantial uncertainty and questions regarding your estate planning. We specialize in staying up-to-date on bills, provisions and other changes that could impact your estate planning. We continuously put our expertise to work to provide you with the best advice. Call 440-930-2826 to schedule a free consultation .