What Does The Secure Act Mean For You?
Everyone wants to maximize the giving power of their estate, whether that means giving funds to charities or maximizing the amount of financial resources that can be transferred to beneficiaries. As of now, a comprehensive estate plan must consider the implications of the Setting Up Every Community For Retirement Enhancement Act of 2019 (SECURE Act). The SECURE Act made significant changes to the treatment of retirement benefits such as IRAs after the account holders death.
The “Stretch” IRA Is Dead
Beneficiaries will no longer have the option of sitting on an IRA indefinitely after inheriting the account. The SECURE Act requires all IRA assets within 10 years. This can have a profound effect on taxation when compared to the impact of withdrawing assets from a plan over a longer period of time. This needs to be considered as you structure your estate plan and consider your choice of beneficiary(s) for your IRA. There are important exceptions to this 10 year rule, including exceptions for a surviving spouse and chronically ill or disabled heirs.
You Have A Little More Time Before RMDs Kick In
Prior to the SECURE Act retirees were required to begin taking required minimum distributions (RMD) from retirement assets such as IRAs. This is good news as it will provide you with some additional time to plan for your retirement and build up assets. It’s also good news because it is a reflection of the fact that people are living longer after retiring.
Divide Your IRA For Tax Benefit
The SECURE Act makes it more beneficial than ever to split the primary beneficiaries on your IRA account. Splitting a large IRA between beneficiaries can reduce the tax impact on your heirs now that they are no longer able to use the “stretch” technique to let inherited assets grow while reducing taxes. One strategy is to make your spouse and child the beneficiary. Splitting the inheritance in half can reduce taxes for your child (your spouse will be given much more favorable treatment due to being an exception to the 10 year rule) and they can presumably inherit the rest of the IRA assets later upon the death of your surviving spouse.
Make The Secure Act Work For You
At The Coleman Law Firm, PLLC, we are well positioned to help you update your estate plan to account for the terms of the SECURE Act. Contact us today to schedule a consultation with an experienced estate planning attorney.