Elder Law & Estate Planning Attorneys
SECURE stands for “Setting Every Community Up for Retirement Enhancement” Act. Its purpose is to incentivize you to save more for retirement. It took effect on January 1, 2020.
The good news in this new law is that:
- It makes it easier for employers to offer retirement plans to their employees.
- It raises the age when you must start to take required minimum distributions from a retirement account from age 70.5 to age 72.
- It eliminates the age restriction for contributions to a retirement account.
These incentives will cost the government some tax revenue. So, there is another provision of the law that is meant to make up for this lost revenue.
Up until the SECURE Act, the beneficiary of your retirement account was able to maintain the account as an inherited IRA and take distributions over their life expectancy. This lowered the overall tax hit and allowed the account to grow tax-free. The SECURE Act mandates that the entire inherited IRA must be distributed out within 10 years for certain beneficiaries. This obviously greatly accelerates the tax hit. Your beneficiary could even be bumped into a higher tax bracket because of their inheritance.
Besides the tax considerations, you may be concerned with protecting a beneficiary’s inheritance from creditors, a divorcing spouse, or even from their own bad spending habits. If you have created a trust to deal with these concerns, or are considering doing so, this new law creates devastating traps for the unwary. Your existing trust may no longer work.
We are advising clients and potential clients who have retirement accounts that are part of their estate plans to have their existing estate planning documents reviewed. If you have not yet done your estate planning, make sure your attorney is familiar with the new SECURE Act and its ramifications.
Levandowski & Darpino
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