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Secure Act’s New IRA and Retirement Plan Rules and the Effects on Estate Planning

The Setting Every Community Up for Retirement Enhancement Act of 2019 (commonly referred to as the “SECURE Act”) was signed into law in December 2019. The SECURE Act makes substantial changes to the taxation and distribution of IRAs and retirement benefits when the account owner dies after December 31, 2019. When a surviving spouse is the beneficiary, the rules remain essentially the same, allowing the surviving spouse to roll over the account balance into their own IRA. When children, grandchildren or others are the beneficiaries, however, the changes are significant.

Under prior law, for example, a child could take distributions over a period as long their expected lifetime, oftentimes stretching out the payments and tax liability over decades with the rate of return outpacing the required annual distribution. In order to avoid giving their children or grandchildren immediate access to the account balance and to ensure that the distributions are taken out over the beneficiary’s expected lifetime, many account owners have named a trust for the benefit of their children or grandchildren as the beneficiary.

Now under the SECURE Act, with very limited exceptions, beneficiaries other than the surviving spouse must withdraw the entire balance within ten years from the date of the account owner’s death. This will in many cases result in beneficiaries receiving distributions from IRAs and retirement plans much quicker than previously planned for and result in adverse tax consequences. As a result, changes to IRA and retirement account beneficiary designations, as well as changes to wills and trusts, will be required.

If you would like to discuss the SECURE Act and its impact on your estate plan, please contact KDDK attorney Mark Samila, Allison Comstock, Shannon Frank, or Steve Lavallo at (812) 423-3183.

About the Author

Mark Samila, a Co-Managing Partner at Kahn, Dees, Donovan & Kahn, LLP, in Evansville, Indiana, is business lawyer whose practice includes tax and estate planning, financial services including bank and bond financing, creditors’ rights, workouts and bankruptcy, and business law. Mark blends his accounting and financial background with his legal experience. In so doing, he provides legal analysis and also understands and considers the business and financial implications of a client’s legal options. Mark is also an Indiana certified civil mediator.

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