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Monday, February 24, 2020

The SECURE Act and Your Estate Plan

Q: How does The SECURE Act impact common estate planning practices?

A new law was signed in December 2019 that made significant changes in the rules regarding both individual and employer-sponsored retirement plans. When the calendar flipped on January 1, 2020, the SECURE Act—and its perks for retirement plans-- went into effect. But unfortunately, an often-used estate planning strategy was simultaneously taken away.

The change--which impacts IRAs left to heirs other than the surviving spouse-- can be so significant to estate planning practices that its implementation may be reason to reach out to your estate planning attorney to see if a modification to your estate plan is worth considering.

How does the SECURE Act affect the inheritance of IRAs?

New York and New Jersey estate planning attorneys have many tools available to draft a comprehensive estate plan that best supports each client’s individual situation and goals. Up until the recent passage of the SECURE Act, heirs who inherited IRAs could stretch out their withdrawals from the IRA for literally decades-- thereby maximizing its tax-deferred growth-- by only taking required minimal withdrawals. But now, that’s all changed. Except for a surviving spouse, heirs of IRAs “must liquidate the account within 10 years”. This unwelcome change is anticipated to result in “careless spending” and squandering of the inheritance rather than sage investing over time as had been what made traditional IRA-based estate planning so appealing in the past.

What are some benefits of the SECURE Act?

While the SECURE Act was a blow to this popular estate planning tool, it does have some good points. One being that there is no longer an age restriction on contributions to a traditional IRA. In recognition of the fact that people are pushing off retirement and working longer, people can now contribute to their traditional IRA after the age of 70 1/2 years old.

In addition, the law makes it easier and less expensive for small businesses to start retirement plans and to participate in “multiple employer plans (MEPs), which allow unrelated companies to jointly offer the same retirement plan”. In addition to more options for workers, and reduced costs, the new law provides “safe harbors” built in that “prevent employers in a MEP from being out of compliance if an unrelated company in the plan fails to send in contributions on time”. Your financial advisor and/or estate planning attorney can address further questions on how this law impacts your particular situation.

If you need assistance with an initial estate plan or would like to modify an existing one, the estate planning experts at Merlino & Gonzalez can help you. Contact us today to schedule a consultation.

From our offices in Staten Island, New York and East Brunswick, New Jersey, we represent clients in both states in all aspects of estate planning, estate administration, and real estate law.


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