The Facts on the SECURE Act

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted Jan. 1, 2020. With it came many questions and issues.

The SECURE Act brought with it the most significant changes to retirement plans since 2006. While some changes impact you, others will impact how you arrange your beneficiary designations and overall estate planning. Overnight, many Americans have found their present estate plan will need to be revised if they are to avoid significant taxation for their heirs.

Changes to Know

  1. You can contribute to your IRA longer. Previously, you could not contribute to your IRA after reaching the age of 70½. However, more and more people are working past that age. The SECURE Act repeals this age limitation, allowing you more time to save.

  2. The required minimum distribution (RMD) age changed. The SECURE Act changed the age at which you must start taking RMDs from your retirement account from 70½ to 72 for those who were born July 1, 1949, or later. This change allows you additional time to grow the funds in your account before you have to start withdrawing from it.

    Disclaimer: The RMD is waived for IRA and other qualified retirement plan owners for the year 2020. Click here for more information on the CARES Act.
  3. IRA beneficiary rules have changed. Prior to the SECURE Act, beneficiaries could take distributions throughout their lives, referred to as the "Stretch" option. This offered tax savings for the beneficiary. The SECURE Act preserved this option for beneficiaries who are spouses but repeals it for non-spousal IRA beneficiaries. They will now have 10 years to withdraw the entire amount. To forestall an heir from liquidating a large IRA inheritance too quickly, many an estate plan installed a "conduit trust". This common planning technique was just made obsolete, at least in most cases.

Are there any ways to get back the old "Stretch" for my heirs?

As a result of this major tax legislation, integrating philanthropic planning has never been more critical to achieve most people's goals to reduce the taxes on a large, inherited IRA going to heirs. Please read this attached article to learn how.

What stayed the same?

If you're 70½ or older, you can still make a tax-free gift to a qualified charitable organization. You can transfer any amount up to $100,000 per year directly to a qualified charitable organization without paying income tax on the distribution. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions. Your gift will also be put to use today, allowing you to see the difference you're making.

We're Here to Help

Without cost or obligation our expert Gift Planning staff is happy to provide to you ideas and solutions that you might take to your qualified advisors for further consideration.