If you are in the State of New Jersey and would like to discuss your estate plan, our team at Willis Law Group LLC is here to provide you with any assistance that you may need. We are pleased to now also offer Snap Estate Plan services, where you can acquire Attorney-Drafted Estate Plans from the comfort of your own home. To schedule a virtual consultation with us, give our main office a call at (877) 296-2575.
Signed into law on March 27, the Coronavirus Aid, Relief, and Economic Security (CARES) Act contains some elements that affect seniors. In addition to authorizing direct payments to most Americans, including seniors, the law also changes required retirement plan distributions for 2020 and includes Medicare-related provisions.
The $2 trillion 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 them 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 will likely take longer than the direct deposit.
The CARES Act also affects retirement plans. Recognizing that the stock market crash has depleted many retirement plan accounts, the CARES 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.
Additionally, the CARES Act allows individuals adversely affected by the COVID-19 pandemic to make hardship withdrawals 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. Individuals who use this option will still have to pay income taxes on the withdrawals, although the tax burden can be dispersed over three years. The dollar limit on loans from retirement plans is also increased until the end of the year.
Further, the CARES Act includes small but potentially important provisions for Medicare beneficiaries. While the Centers for Disease Control (CDC) 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 that beneficiaries can 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.
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