The Secure Act Has Passed! Ways It May Impact Your Estate Planning


Did you know Congress has passed the SECURE Act? “SECURE” stands for “Setting Every Community Up for Retirement Enhancement” Act. This law, which was discussed by both the House and the Senate through much of 2019, became effective January 1, 2020.

This new law has the potential to impact the estate plans of Floridians, no matter the size of their estate. Perhaps the most demonstrative impact the new SECURE Act has is to change the ways IRAs are treated post-death. Let us share with you several of the significant law changes that have resulted from the passage of the SECURE Act here in our blog.

1. One of the major changes arising from the passage of the SECURE Act is the loss of the “stretch” IRA for non-spousal beneficiaries inheriting IRAs after 2019. Previously, you could inherit an account and take the distributions over your life-expectancy. This could have been much longer than ten years. Going forward, most non-spousal beneficiaries who inherit an IRA after 2019 will be required to completely withdraw all plan assets within ten years of the death of the account owner.

2. Nothing will change for deaths that occurred before December 31, 2019. There was concern that the Act would seek to make many of these changes retroactive. This will not be the case.

3. There are exceptions to the 10 year SECURE Act payout rule explained above. Certain “eligible designated beneficiaries” are not required to follow the ten-year rule. They can include the surviving spouse, chronically ill heirs, and disabled heirs. Minor children are also considered eligible designated beneficiaries, but when they become legal adults, the ten-year distribution rule applies to them.

4. This new law increases the age at which an individual must begin taking required minimum distributions (RMDs) from 70½ to 72. The Act states that this change applies beginning with IRA account owners who will attain 70½ on or after January 1, 2020.  Those who reached age 70½ in 2019 will need to continue to take RMDs in 2020 and thereafter.

5. The law expands the definition of a tax-free or qualified distribution from a 529 savings plan. It will now include repayment of up to $10,000 in qualified student loans and expenses for certain apprenticeship programs.

6. There can be an impact on IRA trusts used in estate planning. A person should consider revising his or her IRA trust, if he or she has one, to ensure that the maximum IRA benefit allowed can be reached. This estate planning decision, as well as the updated documents, needs to take place while the IRA plan owner is still alive.

7. Consider making a charity the beneficiary of the IRA account. Through a Charitable Remainder Trust (CRT), you may name the CRT as a beneficiary so that no taxes will be paid when the IRA is distributed to the trust. The money may then grow, tax-free, within the trust, and you can designate both the beneficiaries and a payout term of life that is more favorable than the distribution under the 10-year term. Once the payments have been made to your heirs, the charity can then receive the remainder of the gift.

We know this article may raise more questions than it answers for you. Remember, your family and your legacy are too important to leave up to chance. Do not wait to contact us to schedule a meeting to discuss these issues or any of your estate planning concerns. We are here to help you navigate the storms of life and build a secure future for yourself and your family.

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