THE SECURE ACT OF 2019
The Most Significant Reform of Retirement Legislation in Decades!
On December 20, 2019, President Trump signed the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). The SECURE Act, effective January 1, 2020 is the most impactful legislation affecting retirement accounts in decades. For most Americans, a retirement account is the largest asset they will own when they pass away.
How the SECURE Act will impact you:
- It increases the required beginning date (RBD) for required minimum distributions (RMDs) from your individual retirement accounts from 70 ½ to 72.
- Eliminates the age restriction for contributions to qualified retirement accounts.
How the SECURE Act will impact your loved ones and beneficiaries:
- The most noteworthy: your “Stretch IRA” is now limited to 10 years. The SECURE Act requires most designated beneficiaries to withdraw the entire balance of an inherited retirement account within ten years of the account owner’s death.
- The shorter time period for distributions results in acceleration of income tax due and a potential bump to a higher tax bracket.
- Minors, those attending college up to age 26, disabled, and chronically ill beneficiaries may be able to “stretch” out the IRA for more than 10 years.
The SECURE Act of 2019 makes significant changes to how IRAs and certain retirement benefits must be treated post-death. As a result you should have an immediate evaluation of your current Estate Plan and determine how it may be affected. Consider:
- Reviewing beneficiary designation forms with your lawyer and financial advisor to ensure the forms are filled out correctly
- Reviewing and possibly amending your Revocable Living Trust
- Reviewing your existing IRA Legacy Trust to address the impact the SECURE Act has on your Estate Plan . More importantly, how your legacy might now be vulnerable to creditors or a future ex-in-law
- Possible restructuring of the planning for your IRA account. For instance, you might consider a ROTH conversion, designating one or more charities as a beneficiary of the account, and perhaps using life insurance or other planning steps to address the economic value of what is given to charity
- Creating additional trusts that will stretch out the distributions to the beneficiary over that beneficiary’s lifetime