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How the SECURE Act changes trust planning

On Behalf of | Mar 3, 2020 | Estate Planning And Probate |

The Setting Every Community Up for Retirement Enhancement (SECURE) Act went into effect at the beginning of 2020. Among other things, it changes some of the rules on certain kinds of trusts — which means that you may need to revise your current estate plans.

In the past, you could direct your retirement accounts into a “stretch” trust after your death that would give your nonspouse beneficiaries (like your minor children) distributions over an extended period of time. That was usually the most favorable way to take advantage of tax deferrals, minimizing how much. Under the SECURE Act, however, your nonspouse beneficiaries only have 10 years from the time of your death to take the entire distribution.

That may not be nearly long enough to achieve your goals if you’re hoping to keep the bulk of the money out of your children’s hands while they’re too young to manage it wisely and want to avoid unnecessary taxes. The only exceptions to the 10-year rule are for chronically ill or disabled beneficiaries. Some experts even advise people to consider dropping the revocable trust entirely as the beneficiary of your IRA to avoid losing up to half of it in taxes down the line.

End-of-life plans often need revised with time, but the SECURE Act creates a number of obstacles to effective estate planning and tax mitigation, so it’s important to make an appointment soon to discuss your goals. There may be other options that will help you better secure your children’s future if you should pass away unexpectedly. Please continue reviewing our site for more information about our services or contact us directly to learn how we can help.


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