SECURE Act of 2019 Impact Estate Planning | Ohio Estate Planning

The SECURE Act of 2019 Could Change the Way You Look at Estate Planning

Published on by Agnes Spoelker, Jessica Fleming, in Estate Planning, Tax Services

The SECURE Act of 2019 Could Change the Way You Look at Estate Planning

The SECURE Act (Setting Every Community Up for Retirement Enhancement) of 2019 is poised to make big changes to estate planning.  Money put into a retirement account with pre-tax dollars is not taxed until it is withdrawn from the account, the SECURE Act will reduce the time an inherited retirement account can remain untaxed to 10 years after the owner’s death.

This new act was passed in the House on August 8, 2019, and is expected to pass easily by the Senate shortly.

The previous rules of estate planning allowed us to ‘stretch’ IRA distributions to non-spouse beneficiaries, which allowed the account to continue to grow tax free allowing small taxable distributions yearly to the children or grandchildren.   Many IRA owners created ‘IRA Conduit Trusts’ to make sure beneficiaries could take only the Required Minimum Distributions (RMD) based on their age.  The Trust also protected the assets from the Beneficiary’s creditors.

If passed, the SECURE Act will require most beneficiaries to withdraw the entire IRA balance within 10 years of the death of the owner. The exceptions to the 10-year rule include:

  • A spouse may roll over the decedent’s IRA to their own and stretch distributions over their lifetime
  • Children under the age of majority – however, once they turn majority, they must take distributions under the 10-year rule
  • A disabled beneficiary or a chronically ill beneficiary
  • A beneficiary within 10 years of age of the decedent

The 10-year rule applies to all qualified plans, including plans with post-tax money (Roth retirement accounts).  Upon death, beneficiaries will no longer be able to spread the distributions out over their lifetime.  They will be required to take the distributions in 10 years unless they meet one of the exceptions listed above. Large distributions from these accounts could substantially increase the tax liability by forcing the beneficiary into a higher tax bracket.

The new act will require better management of distributions for designated beneficiaries. Under SECURE, distributions must be taken within the 10-year period.  The timing of the distributions within the 10-year period will require additional tax planning to avoid a large increase in the tax.

Contact Us

The SECURE Act, if it becomes a law, will change things for all IRA owners in a significant way. As the Senate goes through the voting process on the SECURE Act, the Barnes Dennig tax team would be happy to answer questions or discuss your estate planning. If you want to discuss how your tax situation may be impacted by this law, let us know here, and we’ll connect you with a team member at no charge, or let us know by calling 513-241-8313.


Related Services

More Insights

Apply Now