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How does the SECURE Act impact your estate plan?

On Behalf of | Dec 10, 2020 | Estate Planning

People who have had their estate plan in place for more than a year might need to review it now. In December 2019, the Setting Every Community Up for Retirement Enhancement Act of 2019 made some changes to some aspects of individual retirement accounts. Those changes can have an impact on the way IRAs are handled as part of your estate when you pass away.

One of the significant changes is that your loved ones will need a plan for what they will do with the IRA after you pass away. They don’t have to withdraw anything for 10 years, but once that time period passes, everything must be taken out of the IRA.

What does this mean for a stretch IRA?

Before the SECURES Act, the beneficiary of an IRA could opt to have the benefits paid over their life as a way defer income tax. This was especially beneficial when the beneficiary was considerably younger than the original account holder.

Under the SECURES Act, this isn’t possible. While there are some exceptions for some minor children, disabled individuals and the spouse of the original account holder, most individuals will need to discuss ways to ensure their IRA meets their goals with their estate planning attorney.

This is only one consideration for your estate plan. You should discuss your wishes, so you can have everything set up in a way that reflects those. Remember to review your plan periodically because changes in laws and circumstances could mean that your estate plan isn’t going to produce the results you want any longer.

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