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How will the SECURE Act affect your estate planning goals?

You have worked hard throughout your life and now have significant assets, including real property, a stock portfolio and retirement accounts.

Following your demise, your estate planning goals include the distribution of the funds in your IRA to your sister. Will the new SECURE Act require you to rethink plans for her inheritance?

The new law

Congress passed changes to the existing retirement savings law that affects, among others, people who are either retired or close to retirement. The Setting Every Community Up for Retirement Enhancement Act went into effect on Dec. 20, 2019. As a result, people must start to take required minimum distributions, or RMDs, from their retirement accounts at age 70-1/2, rather than age 72.

The SECURE Act also eliminates the prohibition that existed for contributing to an individual retirement account after age 70-1/2. As long as the account holder has earned income, he or she may continue to contribute.

Inherited retirement accounts

The previous “Stretch IRA,” or inherited retirement account law, allowed for the distribution of IRA funds throughout the lifetime of the beneficiary. The new law requires the distribution of those funds within 10 years, which will certainly have an effect on estate planning goals for some people.

However, there are exceptions, which include spouses, minor children and disabled beneficiaries as well as those who are less than 10 years younger than the decedent. This eliminates your sister from the requirements of the SECURE Act because she is only four years younger than you are.

Deadlines and guidance

Perhaps you are not yet 70-1/2 years of age. According to the new law, if you become 70-1/2 on or after Jan. 1, 2020, you do not have to start taking RMDs from your retirement account until 2020. The new SECURE Act will not affect the inheritance you wish to leave for your sister, but you will still want to review your estate plan frequently to ensure that legal changes do not affect other aspects of your plan.

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