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The CARES Act from an Estate Planning and Individual Taxpayer Perspective

What are the key takeaways to the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) from an estate planning and individual taxpayer perspective?

There are a number of provisions in the CARES Act aimed to assist not only business owners but also individual taxpayers:

  • Until December 31, 2020, taxpayers affected by the coronavirus pandemic (which the law defines) can take a distribution up to $100,000 from their retirement savings without being subject to the 10% penalty that normally applies to amounts withdrawn from such accounts before age 59½.
  • The taxpayer can recontribute the distribution to an eligible retirement account within three years of the date of the distribution without regard to that year’s contribution limit.
  • To the extent that distributions are not recontributed, the amounts received will be taxable income; however, the taxpayer may choose to treat such distributions as taxable income ratably over three years (instead of being taxable entirely in the year they are received). (We anticipate that the IRS will provide more details on how this new rule will be applied.)
  • Individuals with outstanding eligible, qualified retirement account loans on or after March 27, 2020, can delay any repayment due in 2020 for one year.
  • The maximum amount an individual may borrow from a qualified retirement plan for loans made during the 180-day period beginning on March 27, 2020 is increased to the lesser of $100,000 or 100% of the individual’s vested account balance.

Temporary Waiver of Required Minimum Distribution (RMD) Rules for Certain Retirement Plans and Accounts

The CARES Act waives the required minimum distribution rules for certain retirement plans in calendar year 2020.

This waiver applies both to 2019 RMDs that needed to be taken by April 1, 2020, as well as to 2020 RMDs.

Allowance of Partial Income Tax Deduction for Charitable Contributions

To encourage charitable giving that is otherwise expected to decline during the coronavirus pandemic, the CARES Act permits a $300 charitable income tax deduction for cash gifts, even if the individual takes the standard deduction.

Temporary Suspension of Limitations on Certain Charitable Cash Contributions

  • For individuals who do itemize income tax deductions, the CARES Act temporarily suspends the 50% AGI limitations for certain charitable contributions and allows deductions up to 100% of AGI. However, contributions must be made in cash and cannot be made to a donor-advised fund, certain supporting organizations, or certain private foundations.
  • For corporate donors, the limit on charitable giving is increased to 25% of taxable income in 2020.

Disaster Relief

  • The CARES Act does not itself add provisions related to disaster relief or personal hardships. However, there has been a presidential declaration of a national emergency due to COVID-19, so employers (and in some cases employer-sponsored charities) may now take advantage of currently existing rules which allow the making of a broad array of payments to employees to defray economic hardships created by the emergency. Such payments are tax-deductible to employers and not taxable to employees so long as they are reasonable in amount.

Payments may be made for items such as unreimbursed medical expenses, certain housing expenses, purchases of nonperishable foods and certain alternative commuting expenses.

Tax Filing Extensions

The IRS has now granted an automatic extension for the filing of 2019 federal gift tax returns and the payment of federal gift tax to July 15, 2020.

However, estate tax returns are still due at their current scheduled date.


Steve Shane Casual | 301.575.0313

Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts, and a charitable trust. He is also experienced with drafting documents for business planning, the incorporation, and application for exemption for Private Foundations and the administration of decedents’ estates.





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