At the start of 2020, the Setting Every Community Up for Retirement Enhancement (SECURE) Act went into effect. While there are a lot of different aspects to the SECURE Act, one thing is for certain: Everyone who has an IRA (or similar retirement plan) should probably be reviewing their estate plans soon.

How are IRAs affected by the SECURE Act?

In the past, people who inherited an IRA could take advantage of the “stretch” provision that allowed them to take minimum disbursements over a much longer period. This was particularly advantageous to young beneficiaries whose parents or grandparents had passed away because it kept them from depleting the funds too soon. It also allowed the balance to keep accruing without additional taxes and deferred the income taxes they might otherwise pay.

Under the Act, most of those people (disabled beneficiaries and surviving spouses are excluded) will only have 10 years to empty the IRA. Not only does that lower the tax advantage of the IRA, it also makes it harder to keep a young heir from wasting what they’ve been given.

How are trusts affected by the SECURE Act?

Many IRAs are currently designated for conduit trust that would eventually transfer the funds to the designated beneficiaries. Now, it may be wiser to have them paid into an “accumulation” trust that will allow the funds to be distributed more in line with your goals. Another option is to simply bequeath the trust’s assets directly to an heir and put other assets into a trust.

Whatever your goals, it’s definitely time to sit down with an experienced estate planning attorney and discuss the changes in the law and see what alternatives you have.