What the new SECURE act could mean for you

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Mark F. Winn

The Setting Every Community Up for Retirement Enhancement (SECURE) Act just passed in December 2019. It makes many changes to the law, effective Jan. 1, that will require people to revisit their estate plan.

For starters, the new beginning date to take out required minimum distributions (RMD's) is 72. Formerly, the age was 70½.

For those with substantial IRA's - 401K's, SEP IRA's, 403(B)'s - there are new rules that affect the ability of a beneficiary to stretch distributions over the beneficiary's life expectancy.

Under the old law (ended Dec. 31, 2019), the beneficiary of the IRA could often effectuate a rollover, which would permit them to take out only the amount required based on their life expectancy.

That has changed.

Now, new beneficiaries must make sure all the inherited IRA money is distributed out of the inherited IRA and all of the income taxes (that had been deferred) are paid to the United States Treasury within 10 years.

Under the old rules, one could leave an IRA and the required minimum distributions (RMD) could be made over the beneficiary's life expectancy. Now, it is 10 years.

To check out a free calculator demonstrating the impact of the changed rules, visit SecureRMD.com. You should know that current beneficiaries of inherited retirement accounts will not be affected by the SECURE Act.

The SECURE Act will prompt smart people who have left IRA's and other retirement assets to a trust, an IRA Trust, (perhaps as a primary or contingent beneficiary) to revisit their planning. In essence, it is advisable for anyone who has left an IRA to a trust to make sure the trust language will not do anything detrimental.

For some with substantial IRA's, they should consider converting the IRA to a Roth IRA. This can be done incrementally, and in the long run, can be of substantial benefit. Paying the tax now on the conversions can avoid a loved one having to pay it later, perhaps when it would put them into a higher tax bracket.

In light of this new law, it is advisable for people to revisit their estate planning. Doing so could avoid the potential negative impact of this new law on your loved ones, and it will also permit you to avoid unnecessary probate court costs, creditors, and loss to in-laws (predatory spouses) in divorce.

It will permit you to make sure assets left to loved ones can be held in a trust for their benefit. This can preserve government benefits and make it so your assets stay in your family as you wish.

There are many considerations when structuring your legal affairs, and each case is unique. This is why you should review your legal papers. If you have any questions as to how they will work for you, you should revisit the planning so as to protect you and your family as much as you can. A little bit of planning can make a big difference.

Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. mwinnesq.com

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