LEGISLATIVE ALERT: The SECURE Act & How It Affects Retirement and Estate Planning

The SECURE Act & How It Affects Retirement and Estate Planning

Today the Senate passed The SECURE Act as part of its grand spending package. The acronym stands for Setting Every Community Up for Retirement Enhancement. Now that the bill has passed both the House and the Senate with broad bipartisan support, the President is expected to sign it into law and the law is expected to take effect at midnight this New Year’s Eve.

Amongst the sweeping changes this law will make to retirement savings are two provisions that are immediately relevant for retirement and estate planning purposes. First, the law recognizes that people are generally working later in life and living longer, so it raises the age at which we must all begin taking required minimum distributions (RMDs) from our qualified retirement savings accounts, such as 401(k)s, 403(b)s, and individual retirement accounts (IRAs). Now we will gain an extra 18 months of saving toward retirement and begin taking distributions at age 72 instead of at 70½ years of age.

Second, and most importantly for our purposes, the law will prevent the long-term stretch-out of inherited retirement assets to which we had become accustomed. Instead, the SECURE Act will require that all inherited IRA assets be paid out in full within 10 years after the plan participant’s date of death. As a result, some of the techniques that had been best practices under former law will no longer be advisable under many circumstances. For example, in some cases, it may no longer be automatically assumed that a surviving spouse should roll over an inherited retirement account. Additionally, trust provisions that previously allowed for retirement account assets to flow through a trust to the intended beneficiary may no longer make the most sense, for income tax purposes or asset protection purposes, and from a long-term planning perspective. On the other hand, retirement account assets that accumulate inside of a trust may be taxed at a higher income tax rate than if those assets were distributed to a beneficiary.

There are some planning options and opportunities we can explore but as always, each individual situation is unique given that there are so many personal and financial variables at play. We will need to examine the pros and cons of income tax savings vs. asset protection planning, the beneficiaries’ ages, health, life circumstances, and so forth. This review and strategy to plan the best course forward for you and ensure that your legal documents, beneficiary designation contracts, and instructions for effectuating your wishes are all poised to work as intended will be most effective when you have your personal team of professionals guiding you through your options.

We are here to serve as your trusted legal counsel and we strongly encourage you to contact our office now to request to schedule a meeting to see how the new SECURE Act affects your estate plan at your earliest convenience. You may call our office at (781) 740-0848 or email to info@dgvelaw.com.

If you are already a DGVE law client, you may also request your estate plan review meeting via this link: https://dgvelaw.as.me/review. Around our holiday vacations, we will be reviewing all client files over the next few weeks and reaching out directly to any clients we determine are most likely to want to update their legal documents in light of this new federal law, but please do not hesitate to contact us sooner if you have any concerns.

If you are not yet a member of the extended DGVE law client family, you may request a new client appointment to review your current estate plan by calling or emailing our office or by using this link: https://dgvelaw.as.me/trustreview or to help you create a new plan entirely you may request a new client Peace of Mind Planning Session via this link: https://dgvelaw.as.me/POMPS

We look forward to being of assistance to you and your family as we all learn to navigate these new waters together. Meanwhile, we wish you and your loved ones health, happiness, peace of mind, and comfort of heart this holiday season and beyond.

Attorney and Counselor at Law

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