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A bill that will do away with a tax-planning strategy for inherited individual retirement accounts isn’t law yet, but financial advisors should act now to help clients avoid a surprise.

The Secure Act, which the House of Representatives voted in favor of, 417-3, in May, aims to shore up workers’ retirement savings through a number of changes.

One provision will allow small employers to band together and sponsor a retirement plan. Another will repeal the maximum age of 70½ for contributions to traditional IRAs.

Here’s how the House proposes paying for it: There’s a revenue provision that will require most nonspouse beneficiaries to distribute inherited IRAs within 10 years of the original owner’s death.

Effectively, this puts the kibosh on a strategy wealthy IRA owners use to pass large retirement accounts to heirs, known as the “stretch IRA.”

Younger heirs – for instance, your grandchildren – can take required minimum distributions from the inherited IRA based on their much longer life expectancy.

While those heirs take their distributions, they’re “stretching” the tax-deferred growth of the IRA over decades.

“It makes sense: Once you’re dead, you don’t need a retirement account,” said Jeffrey Levine, CPA and CEO of BluePrint Wealth Alliance in Garden City, New York.

He discussed estate planning techniques for IRAs at the American Institute of CPAs Engage conference in Las Vegas on Monday.

Here are five points advisors should review with their clients to make sure they aren’t caught off guard once stretch IRAs are out of the picture, according to Levine.

1. Reevaluate your beneficiaries.

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Though the Secure Act does away with the stretch for nonspouse heirs, it makes an exception for a handful of beneficiaries: a surviving spouse, an owner’s child who is still a minor, a beneficiary who is chronically ill or disabled, or a beneficiary who is no more than 10 years younger than the IRA owner.

Originally, a saver might have listed their 1-year-old grandson as the beneficiary of a large IRA, betting that the grandchild would benefit from stretching the tax deferral for 80 years.

That plan is likely void after the Secure Act goes through.

“It might not make sense to do that anymore,” said Levine.

2. Build flexibility into the plan.

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There’s more to passing on an IRA than just naming beneficiaries.

Work with your client to consider other scenarios that may occur at death, said Levine.

For instance, what if one of the heirs decides to disclaim the inherited IRA. Have you planned for that contingency? Prepare for it now.

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Other ways to build in flexibility into a plan include potentially treating different beneficiaries in an unequal manner to make things more even, said Levine.

“You could leave a bigger traditional IRA to a low earner, and a smaller Roth IRA to a high earner,” he said.

3. Consider Roth IRA conversions for legacy planning.

Your client shouldn’t just worry about taxes in the present. They should consider where tax rates might be after their death, when their heir needs to start taking distributions.

Depending on the situation, it may make sense to convert that IRA to a Roth IRA. In this case, the investor pays income taxes on the amount converted.

A nonspouse beneficiary who inherits a Roth IRA can take RMDs over his or her own life expectancy.

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This beneficiary can also take distributions without being taxed (including earnings, as long as it has been at least five years since the initial contribution was made). Assets left in the Roth IRA continue to grow tax-free.

“I believe conversions will accelerate because it’s a play on ‘Am I better off at paying taxes at today’s rates or paying the future rate?'” said Levine.

“The rate of the future doesn’t end when I do,” he said. “It goes on.”

4. Permanent life insurance becomes more valuable.

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Your client’s premium dollars can purchase a policy that’s worth several times the amount of what they’re paying. The sweetener: Those death benefit proceeds are generally tax-free to the recipient.

Here’s the catch: Just make sure that you routinely check on your client’s insurance policy and make sure that its performance is on track.

Permanent life insurance contracts require periodic review to ensure that the premium and interest rate assumptions remain accurate.

5. Charitable trusts to recreate the stretch IRA.

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A charitable remainder trust allows you to leave money to an heir and to a charitable organization.

Over a specified period of time, your beneficiary gets a stream of income from the assets. At the end of that period, the charity gets what’s left.

This strategy would call for a trust to be a beneficiary of an IRA, which means you’ll need to work with a CPA and an estate planning attorney to avoid any tax slip-ups.

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