Preserving & Protecting Your Family’s Assets & Legacy

The potential effects of the Secure Act on your retirement plans

On Behalf of | Dec 10, 2020 | Estate Planning |

The year 2020 presented financial challenges for people all across America. This year, even the wealthy had to reconsider how they managed their money. The Secure Act made changes to how IRAs worked and how they interacted with trusts. 

CNBC explained that see-through trusts could no longer stretch IRA distributions. It also advised IRA owners who named beneficiaries should check to see whether they needed to make changes to their designations. 

The stretch IRA

Prior to this law, wealthy Americans passed on big retirement accounts to their heirs. The people who inherited the account could then stretch the withdrawals out across the rest of their lives. However, the new law compels beneficiaries to empty the accounts within a decade. Spouses and minor children may seek exemptions from this. Wealthy people who name trusts as beneficiaries may need to reconsider the type of trust managing the assets. 

The new stretch plan

Other provisions do exist that can help wealthy and everyday Americans and their heirs get the most out of IRAs. NerdWallet recommends the following: 

  1. Choose a tempo that allows withdrawal of the funds from the account on time. 
  2. If given a choice, ask the individual to use a Roth IRA to avoid paying taxes on the withdrawals. 
  3. People who inherit a traditional IRA may need to calculate the withdrawals as income when determining the tax bracket and tax liability. 
  4. Consider donating to charities to reduce tax liabilities for traditional IRAs. 

Nerdwallet believes that people should reconsider using IRAs for estate planning, altogether. However, accumulation trusts might serve the needs of people who want to keep IRAs as part of their estate plans. 


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