Q: What is the SECURE Act
A: This was a change in the law which among other things, adjusted the rules for when required minimum distributions need to be taken by the account holder, and changed how the retirement account must be distributed at the death of the account holder.
Q: What does the SECURE Act do?
A: Major highlights:
- Eliminates the option to “stretch” the IRA over the beneficiary’s lifetime and instead, the whole IRA must be taken within ten years after the account holder’s death. It does not need to be taken every year, but at the end of the tenth year, whatever is remaining in the account must be distributed.
- Raises the age at which you have to take your RMD to 72 (used to be 70 ½) – see more below.
- Allows account holders to make contributions to their IRA after 70 ½ if they are still working
Q: Do I still have to take my RMD (Required Minimum Distribution)?
A: Were you born before July 1, 1949? If yes, then yes, must still take RMDs.
Were you born on July 1, 1949 or later? If yes, then no, you do not need to take RMDs yet (until the year the account holder turns 72).
Q: Are there exceptions for certain beneficiaries?
A: Yes, the 10-year rule does not fully apply to: surviving spouses, chronically ill heirs, disabled heirs, minor children (until age 18), and beneficiaries who are not more than 10 years younger than the deceased account holder.
Q: Do I need to update my Trust since the SECURE Act was signed into law?
A: For Clients: No; if your Trust was drafted using the LWPCCS software, the language in the Retirement Plan Article is still valid and does not cause any problems with the SECURE Act. The only thing that may need to change are beneficiaries of your retirement plans if you have a very large retirement plan.
For LWP Members: this may change planning going forward, but already-established Trusts do not need to be updated
Q: For existing Probate and TA clients – does this affect me?
A: This only applies to retirement plans inherited from someone who died AFTER January 1, 2020. If the account holder died prior to January 1, 2020, even if the account has not yet been distributed/collected, then the old rules still apply and it can be stretched over the beneficiary’s lifetime.
Q: How can I learn more?
A: Lawyers With Purpose offered a special "SECURE Act: Everything You Need to Know" training session with Dave Zumpano for its members on January 21, 2020. If you're an LWP member and would like a recording of that training, please email firstname.lastname@example.org.