The SECURE Act: How It May Impact Your Estate Plan
The Setting Every Community Up for Retirement Enhancement Act (the “SECURE Act”), became effective on January 1, 2020. With this Act, for many beneficiaries of retirement plans, payout over life expectancy has been eliminated.
Prior to the SECURE Act, any person, or particular types of trusts, could be named as the beneficiary of retirement plan assets, and the beneficiary could potentially receive distributions from the retirement assets over the beneficiary’s lifetime, also known as a “stretch IRA.”
Under the SECURE Act, the life expectancy payout has been replaced by a 10-year payout rule for most beneficiaries. The Act requires that for deaths occurring on or after January 1, 2020, most beneficiaries must take out all retirement assets within 10 years of the death of the account owner. There are some exceptions to the 10-year rule:
(1) A surviving spouse;
(2) minor children of the account owner, until the age of majority;
(3) chronically ill or disabled beneficiaries; and
(4) persons not more than 10 years younger than the plan participant.
For beneficiaries who may be within these categories, the old rule would apply and they may potentially still receive the lifetime stretch for the payout of such retirement account benefits.
Please contact our office if you would like to discuss the significance of these changes with an attorney, how they may affect your estate plan, and to assist with any revisions that might be necessary to your current estate plan in light of this change in law.