If You Have an IRA, You Need to Revisit Your Estate Plan in Light of 2020 Changes

Lawyer Explaining the Secure Act to a ClientRetirement planning often goes hand-in-hand with estate planning. As you look ahead to how you will fund your retirement, you also need to think about how you want your assets to be managed after your death. For many people, a tax-advantaged savings plan such as an employer-sponsored 401k or an Individual Retirement Account (IRA) is at least part of their retirement portfolio. If your estate plan includes retirement accounts, now is the time to meet with an advisor to make some changes. New laws that went into effect in January of 2020 could have a significant impact on your plan.

Understanding the 2019 SECURE Act

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed by Congress in an effort to overhaul what they saw as a broken system. One good thing to come out of it is that it provides part-time workers and small business owners with access to tax-advantaged savings plans—something they didn’t have before. It also raises the age at which you have to start withdrawing from the account from 70½ to 72, giving you more time to earn interest and to put off paying income tax.

However, the downside to the SECURE Act is how it affects beneficiaries of retirement savings accounts. While it will not affect how a spouse inherits the funds, other beneficiaries will be required to empty the account within 10 years. If there are significant funds in the account, not only will the heir lose out on the potential growth of the account, but they will have to pay income tax on it, and they could be pushed into a higher tax bracket. What you thought would be a gift to your children could end up costing them—unless you make some changes now.

What You Need to Do Now If You Have an IRA

Everyone’s circumstances are different, and you will need advice about what to do that is based on your own situation. Options might include adding more beneficiaries so the money is spread out or setting up trusts to manage the money. What you need to do now is discuss what makes sense for you with your estate planning attorney or financial advisor.

The estate planning attorneys at Littlejohn Law, LLC, understand how the SECURE Act will affect your retirement and your heirs and would be happy to review your estate plan to help you avoid some of the pitfalls of the new law. Fill out our contact form to get started today.

 

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