On Friday December 20, 2019, the SECURE Act was signed into law. This new legislation, which became effective January 1, 2020, drastically changes the landscape for estate plans involving retirement accounts. The purpose of this letter is to make you aware of the basic changes in the law and briefly explain how this may impact your estate plan.
The SECURE Act's most significant change involves how beneficiaries of retirement accounts will receive disbursements after the death of the account owner (and his or her surviving spouse). Prior to the SECURE Act, many clients have relied on the income tax benefits of the "stretch IRA," allowing certain types of beneficiaries (and trusts) to spread out (or "stretch") distributions from retirement accounts over the life expectancy of the beneficiary, thereby continuing the account's tax-deferred status over this period. With the SECURE Act, however, these "stretch" distribution rules have (with certain exceptions) largely been eliminated. Thus, your prior planning with respect to your retirement assets may no longer be optimal. If you have a retirement plan of significant size, or if you have named a trust as a beneficiary of your retirement plan, there is a significant likelihood you will need to update your plan for your retirement accounts.
If you have any questions concerning how this new legislation may impact your specific estate plan, please do not hesitate to contact our Estate Planning & Probate Department by calling 440.695.8040. This article provides an overview and summary of the matters described therein. It is not intended to be and should not be construed as legal advice on the particular subject.