What Is the SECURE Act and How Could It Affect Your Estate Planning?

The SECURE Act, which stands for “Setting Every Community Up for Retirement Enhancement,” enacted numerous provisions that may impact your estate plan beginning January 1, 2020. Perhaps the most noteworthy provision in the realm of estate planning relates to inherited retirement accounts. The previous rule, often referred to as the “stretch IRA,” allowed individuals inheriting retirement accounts to stretch out required minimum distributions (RMDs) over their own lifetimes. The new provision implemented by the SECURE Act, which will apply only to account holders dying on or after January 1, 2020, eliminates the stretch distribution, and will now require a full payout of the inherited IRA within 10 years of the original account holder’s death. Although there are limited exceptions to this rule, such as inherited retirement accounts collected by the surviving spouse of the decedent, the SECURE Act will undeniably have a significant impact on many estate plans. The implications will vary and could have very different consequences depending on each individual’s goals and assets held inside IRAs.

Other notable ways the SECURE Act may impact your retirement include an increase in the age that triggers required minimum distributions ("RMDs") from 70½ to 72, as well as repealing the age-based restriction on contributions, which means individuals may now make contributions to a traditional IRA for an indefinite period. The SECURE Act contains several other tax-advantageous provisions for both individuals and employers, such as including part-time employee participation in 401(k) plans. These changes were designed to ultimately strengthen retirement security nationwide.

For more information regarding the Secure Act or any other related matters, please reach out directly to Michelle J. Daniels, William T. Foley, or any of the other experienced attorneys at Erickson | Sederstrom.

This article does not create or constitute an attorney-client relationship and is not intended to convey or constitute legal advice. It is important to speak with a qualified professional regarding your specific matter prior to taking any action.