A new federal appropriations bill was enacted into law by Congress and the President in the final weeks of 2019.  This law includes changes to the federal tax code that may affect your qualified retirement plan (such as a 401(k) or IRA).  Those changes, often referred to as the “SECURE Act,” may affect individuals during their lifetimes, but may also affect the way in which those retirement assets may be distributed to their beneficiaries after death.  This post summarizes some of the key aspects of the SECURE Act that may affect an individual or his/her estate plan.  Importantly, many who previously prepared wills with an attorney may want to consider whether these changes to federal tax law warrant visiting an attorney to make changes to their estate plan going forward.  

Changes Affecting You During Life under the SECURE Act

• The age at which a person must begin taking distributions from a retirement plan is increased to 72 (from 70 ½) for those who were not yet required to take distributions under the old law.
• The age cap for funding traditional (non-Roth) IRAs is removed, meaning that individuals over age 70 ½ are now eligible to make contributions to a traditional IRA.

After Your Death under the SECURE Act

• The prior rules concerning so-called retirement distribution “stretch out” have been eliminated for all but a small group of beneficiary (discussed in the next bullet point), and thus, most designated beneficiaries for inherited retirement accounts will be required to receive the full amount of an inherited qualified plan or IRA within 10 years of the death of the person who funded the plan or IRA.
• Certain designated beneficiaries, including one’s surviving spouse, minor children (but not grandchildren), and beneficiaries who are disabled or chronically ill, are still permitted to take distributions over their expected lifetimes (though children who are minors at the time of inheritance must now take the full distribution within 10 years after reaching the legal age of adulthood). However, if the retirement assets are left to those beneficiaries in trust, they may not qualify for the lifetime distribution, depending on the terms of the trust.
• The SECURE Act does not change the method of designating a beneficiary or beneficiaries to receive inherited retirement assets. If you have existing beneficiary designations in place, those designations are still valid.
• The SECURE Act does not invalidate your estate plan. However, it may result in unintended consequences, which is why it is important you reach out to us to determine if any aspect of your estate plan should be altered.

Take Action

If you have assets in a qualified plan or IRA, we can help you determine that those retirement accounts are disposed of in the best possible manner, taking into account the SECURE Act changes.  We would welcome the chance to discuss these changes with you, answer any questions you may have, and make recommendations specifically for you.  Please contact our office to arrange a meeting or phone conference so that we can help you find the best planning solutions to meet your needs and those of your family.

About Goodwin Weber PLLC

We are a boutique law firm practicing on Market Street in Gaithersburg, MD, and Main Street on Chincoteague Island, VA.  We have attorneys licensed to practice law in Maryland, Virginia, Washington, DC, and New York, and all federal trial courts in VA, MD and DC.  We are lawyers with big city experience, but who believe in small town values.  We practice law because we enjoy helping people — and we sometimes even bring our dogs to work.  If you would like to speak to us about estate planning, or your existing will, please contact us here.  

Note:  The contents of this letter are for informational purposes only, and are not intended to constitute legal advice or form an attorney-client relationship.  For information and advice particular to your situation, please contact Julie Goodwin Weber at 301-850-3387 or Sandra R. Burton Stalzer at 301-850-2792.