Estate PlanninG

The Secure Act

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) was signed into law by the Trump Administration on December 20, 2019. The SECURE Act, which became effective January 1, 2020, significantly affects the beneficiaries of retirement accounts in that it requires most designated beneficiaries to withdraw the entire balance of an inherited retirement account within ten years of the account owner’s death. Prior to the SECURE Act, there was no deadline for when beneficiaries of inherited retirement account had to deplete said account; the beneficiaries could take distributions over the span of their entire lives. With the new, shorter ten-year window in which beneficiaries have to withdraw the entirety of their inherited retirement accounts, many can expect to pay higher income taxes as they will necessarily have to take larger annual distributions than they would have if not for the SECURE Act. Consequently, those individuals effected by this change will ultimately receive less of the funds contained in the retirement account than their deceased owners had originally anticipated.

There are exceptions to this new rule under the SECURE Act. Spouses, disabled individuals, minor children of the account owner until they reach the age of maturity, and beneficiaries who are no more than ten years younger than the account owner have a special exception to the SECURE Act’s ten-year distribution requirement. Also, beneficiaries of retirement accounts from owners passed prior to 2020 do not need to worry either. The ten-year distribution rule only effects beneficiaries of someone who died after 2019.

If you or someone you know is interested in setting up an estate plan which takes into consideration the changes contained in the SECURE Act, call Ivette M. Santaella, of the Santaella Legal Group, servicing San Ramon Tri-Valley bay area to schedule a consultation and take the first step in ensuring that the ones you love and your estate is in order.