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T&E TALK: Proposed “Secure Act” May Impact Your Estate Planning

Posted by Scott T. Ditman, CPA/PFS on Jun 17, 2019 7:00:00 AM
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The House of Representatives has acted to address our longer life spans and a growing crisis for retirees.  It has issued "The Setting Every Community Up for Retirement Enhancement Act of 2019," or “The Secure Act” for brevity.  Should the legislation be passed by the Senate and signed by the president, it may have important implications for your estate planning.

Increase the RMD Age – More Time to Grow Your Wealth 

The Act proposes to increase the age from 70½ to 72 when required minimum distributions (RMDs) must begin from retirement plans. Those planning their estates will be able to factor into their planning this additional time to grow their retirement savings.

10-Year Rule – Shorter Window for Beneficiaries to Take RMDs

Currently, when an IRA owner dies, non-spousal heirs of any age, regardless of the type of IRA, must take RMDs based on their life expectancy. The younger the beneficiary, the lower the RMD, which allows more funds to remain in the IRA to stretch the IRA over time — perhaps over decades. This Stretch IRA strategy would be greatly diminished under the Act as retirement accounts would be forced to distribute the entire IRA within 10 years of the owner’s death, except when the beneficiary is:

  • the surviving spouse;
  • disabled or chronically ill;
  • not more than 10 years younger than the deceased IRA owner; or
  • a child who hasn't reached majority age.

Additional Noteworthy Provisions

  • Long-term part-time workers would be allowed to participate in 401(k) plans
  • For qualified expenses, parents would be allowed to withdraw up to $5,000 from retirement accounts penalty-free within a year of a birth or adoption
  • Parents would be permitted to withdraw up to $10,000 from 529 plans to repay student loans

If you have questions about the impact of The Secure Act on your circumstances, you can reach me at SDitman@BerdonLLP.com or contact to your Berdon advisor.

Scott T. Ditman, a tax partner and Chair, Personal Wealth Services at Berdon LLP, advises high net worth individuals and family/owner-managed business clients on building, preserving, and transferring wealth, estate and income tax issues, and succession and financial planning.

Topics: T&E TALK

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