PITTSBURGH — Retirement accounts and estate plans may soon be taking a major hit from the IRS, if Congress decides early next year to change the rules on a tax strategy involving inherited IRAs that many affluent families have used to their advantage for years.

Under current rules, people who contribute to an individual retirement account and don’t need the money to meet retirement living expenses are able to pass the account along to their heirs. That money is then allowed to keep growing tax-deferred throughout the heirs’ lifetime, with minimal taxes due on the withdrawals.

But the ability to stretch an IRA across generations could be coming to an end.

The Senate Committee on Finance voted 26-0 in September to kill the “Stretch IRA” for non-spousal beneficiaries — putting trillions of dollars of legacy wealth in danger of being collected by the tax man.

“This is going to be big,” said James Lange, a Pittsburgh-based tax accountant, attorney and author. “It’s not a done deal. It’s not immediately effective. But in the past when you had a 26-0 Senate vote, the legislation always became law the next year.”

The Senate proposal will be included in a bill called the Retirement Enhancement and Savings Act, and would require beneficiaries of an inherited IRA or other qualified retirement account to pay all taxes due on the account within five years of the owner’s death.

The proposed law does not apply to surviving spouses. Surviving spouses may still spread the taxes due on the account across their life span or roll the money into another retirement account.

As it stands, the proposal includes a $450,000 exclusion, which applies to non-spouse beneficiaries. A $1 million inherited IRA would only be subject to taxes on $550,000.

The proposed rule would not affect Roth IRAs because taxes on those accounts have already been paid with after-tax income by the account owner.

Taxes on traditional IRAs are deferred until the account owner begins making withdrawals to cover living expenses during retirement. Heirs are required to continue making annual withdrawals from the inherited account and pay taxes on those withdrawals. The new rule would dramatically speed up the pace of those withdrawals.

“The five-year limit isn’t so bad if you are paying taxes on $100,000, but if you have $500,000 to pay taxes on, it could be a challenge,” said Howard Davis, president of the Davis, Davis & Associates accounting firm in Pittsburgh.

Davis has several clients with IRA balances of $1 million or more. “You could wait until year five to pay the entire tax bill, but it could also push you into a higher tax bracket.” He said it probably makes more sense to take out a portion each year to lower the tax ramifications.”

The total amount of money at stake is substantial.

Total U.S. retirement assets were $24.5 trillion as of June 2016, up 1.3 percent from the end of March, according to the Washington, D.C.-based Investment Company Institute. Retirement assets accounted for 34 percent of all household financial assets in the U.S. at the end of June.

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