By Jack Dooley

While shoppers filled area malls as part of the last minute holiday rush, the most significant piece of retirement legislation since 1997 was being signed into law.

The Setting Every Community Up For Retirement Enhancement (SECURE Act) will have a major impact on estate planning. The legislation was signed into law by President Trump on December 20.

If a retirement account is a significant portion of personal wealth and therefore a major element in an existing estate plan, it is important to review the income tax ramifications of any planned distribution.

The biggest tax impact of the SECURE Act is the change to the Required Minimum Distribution rules following death. For deaths occurring prior to January 1, 2020, a non-spouse named as a beneficiary of an IRA or 401(k) could “stretch out” Required Minimum Distributions from the plan over his or her own life expectancy.

Thus, it was good planning in most instances to assure that a spouse was named as the primary beneficiary on the plan and that children (or other intended beneficiaries) were named as the contingent or secondary beneficiaries.  This was a simple and easy way to plan for the lowest possible income tax liability.

This has all changed with SECURE.  Now, the named non-spouse beneficiary will only have ten years after the death of the account owner to distribute all of the retirement assets unless the beneficiary qualifies in one of the very limited exceptions.

Also, Required Minimum Distributions are not required during this ten-year period so the non-spouse beneficiary could mistakenly delay distributions only to have the entire account be distributed as ordinary income at the conclusion of year ten.

The SECURE Act also pushes out the Required Minimum Distribution start date for most situations until age 72 instead of the previous age 70 ½. Tax-deductible IRA contributions are also now permitted after 70 ½.

The bottom line is the SECURE Act changes retirement planning. Now that the holidays are behind us, make sure you understand the law and its potential impact on your estate planning.

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Jack Dooley assists clients with estate planning and administration so their wishes will be fulfilled and their estates will pass on through generations.

Results matter at Dischell Bartle Dooley, a full-service law firm headquartered in Lansdale.

Dischell Bartle Dooley attorneys have been helping individuals, businesses, municipalities and school districts in Montgomery County since 1977.

Click here to learn more about their commitment to results or call 215-362-2474 to talk with an attorney today.