How Estate Planning Undergoes a Change With The SECURE Act


The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) signed in December 2019 has far-reaching effects on retirement planning. While some changes impact the employers, others impact IRAs and 401(k)s of individuals.

For those who have tax-deferred saving account, their estate planning will undergo significant changes. We take a look at some updates they would have to make with this new set of rules to improve the savings landscape.

Designated beneficiaries of a 401(k) and Individual Retirement Account (IRA) can avail of a reduced distribution schedule. In case the plan participant passes away, then the beneficiary needs to complete the distribution 100% within 10 years of his/ her death. Earlier, what used to happen was that the heirs were allowed to obtain distributions over the beneficiary’s remaining life expectancy. For instance, a beneficiary aged 50 years would have been allowed to 35.2 years of distributions from IRA accounts acquired from the deceased plan participants.

Under the new mandate, however, this stipulation will undergo a drastic change. As per the new update to the rules, the eligible designated beneficiary need not go with staggered distributions every year. He can complete the entire distribution in one go under a lump sum payout method or split it across 10 years.

Are there any exceptions to this rule?

The rule will have a blanket implication on almost all US residents. However, there are a few exceptions as below –

1 – Surviving husband or wife

2 – Individuals suffering from chronic illness (depends on a case by case basis)

3 – If the deceased plan participant names beneficiaries who are minors

4 – Specially abled individuals

It is evident that a small minority will come under the exception clauses. The remaining set of recipients will have to adhere to the new set of rules applicable from December 2019 onwards. Connect with NuView Trust Company to gain a complete understanding of how the SECURE Act impacts estate planning.

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