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Estate Planning Alert

The SECURE Act was passed in the House of Representatives by a vote of 297 to 120 on December 17, 2019 and by a vote of 71 to 23 by the Senate on December 19, 2019. The Act’s prevailing goal is to encourage employers who may have previously resisted offering tax-advantageous retirement plans, due to their expense and administrative requirements, to increase access to their employees.

The key takeaways from the SECURE Act include:

So, what does this mean for Estate Planners?

Currently an individual can accumulate up to $11.4 Million in assets over his/her lifetime, which can be distributed upon death without having to pay federal estate taxes. This number doubles for married couples. If part of those accumulated assets come from an IRA account, however, the new Act can have some notable tax consequences. As stated above, the non-spouse beneficiary must now deplete that account within 10 years from the date of death. So, instead of stretching out distributions over the beneficiary’s lifetime, thereby making Uncle Sam wait for the taxes, the wait is decreased to 10 years at a maximum.

For estate planning, the Act does not directly affect the “parent(s) client(s),” but rather the beneficiaries who will receive an inheritance out of this type of retirement account. Thus, careful consideration should go into what assets are used during retirement years, and what assets are to be conveyed to beneficiaries upon death. Similarly, estate planners are wise to inform clients of the substance of the SECURE Act provisions so that in turn, they can inform their beneficiaries. If you haven’t cracked open your estate plan since the birth of your first child, now may be the time to contact your attorney, tax and financial advisors and review your asset list.

December 2019

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