The SECURE Act went into effect on January 1, 2020. The SECURE Act stands for Setting Every Community Up for Retirement. This Act includes some significant changes to retirement plans—some of these are the biggest changes that the U.S. has seen in decades. Since it has the potential to substantially impact retirement savings strategies, it is important for everyone to understand how the Act may impact their estate plans.
The estate planning attorneys at Galanti and Copenhaver are here to help you with all of your estate planning needs. If you are wondering how the SECURE Act might impact your estate plans and retirement planning, give us a call today. We are ready to help you get started planning for your future. Contact the law office of Galanti and Copenhaver today to schedule a consultation to talk about your estate planning needs.
Increased Access to Retirement Plans
One of the goals of the SECURE Act is to ensure that Americans have better access to retirement plans. The Act provides some modest tax incentives for small employers to establish new 403(b) or 401(k) plans for their employees. In addition, it allows for the potential for multiple employers to establish pooled plans together.
The SECURE Act also requires that employers permit part-time employees who work 500 hours or more per year to have access to the company’s retirement plan. Depending on your individual circumstances, these changes may affect you and allow you to focus more on building retirement accounts as part of your estate planning if you are still in the workforce.
Change to the Required Minimum Distributions Age
Prior to the enactment of the SECURE Act, your required minimum distributions began in the year in which you turned 70 ½ years of age. If you did not take the required minimum distribution, you would be charged a penalty.
Under the SECURE Act, you can now wait until you turn 72 years of age to take your first required minimum distribution. This rule is important to know, not just so that you can avoid the penalty, but also so that you are aware of the taxes that you will need to pay on these funds (unless it is a ROTH IRA account).
Changes to Inherited Retirement Accounts
The SECURE Act also made some changes to the rules regarding inherited retirement accounts. In the past, a stretch trust was a popular method of estate planning in which parents would place their retirement accounts in a trust for the benefit of their children.
This was a lucrative option, as parents could have control over the inheritance and not give their children too much money all at once. Additionally, this method provided protection from creditors.
As of January 1, 2020, most beneficiaries are required to withdraw any inherited funds within ten years of the death of the plan participant. While this change does get rid of the required minimum distributions under these circumstances, it does come with the caveat of the loss of some potential deferred tax benefits, depending on the age of the beneficiary.
Will the SECURE Act Affect My Estate Plans?
If you have already drawn up your estate plans, and you think there is any possibility that these changes may apply to you and your beneficiaries, it is crucial to have an estate planning attorney review your current estate plans. The SECURE Act changes how some current beneficiary designations may be implemented. It may also result in increased tax liability for some beneficiaries.
Due to the changes in the SECURE Act, there may be unintended consequences causing your beneficiaries to pay more in taxes than you planned. Your estate planning attorney can help you revise your estate plans to ensure that they have the intended results.
Anyone with a retirement account should take the time to review their current beneficiary designations, along with all of their estate planning documents. It is of most importance to review any estate plans that involve trusts as retirement plan beneficiaries.
What Should I Do If I Have Not Created Any Estate Plans Yet?
If you have not gotten started with estate planning yet, now is as good as a time as ever to begin. An experienced estate planning attorney can help you understand how to use the changes in the SECURE Act to your benefit when making your plans. Careful estate planning strategies that are implemented now will take these changes into account to ensure that you are accomplishing your estate planning goals while helping your beneficiaries avoid unnecessary tax burdens.