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By:  Elizabeth Green, Esquire

In December 2019, Congress passed the Setting Every Community Up for Retirement Enhancement Act of 2019 abbreviated to the SECURE Act.  The SECURE Act has many sections and covers many topics.  For our purposes, we focus on just a few.

Required Minimum Distribution Age:  The SECURE Act has raised the age at which a person must begin taking distributions from his or her retirement plan (“RMD”) from 70 ½ to 72.  This will allow the funds to grow tax deferred for longer.  This applies only to individuals who had not reached 70 ½ before the Act took effect.

Contributions to Retirement Plans:  After the passage of the SECURE Act, there is no longer a limit on the age at which you can make contributions to an IRA.  If a person continues to work past 70 ½, he or she may continue to contribute to a traditional IRA.

Beneficiary IRA:  The SECURE Act has changed the way in which IRAs may be distributed after the death of the owner.  For most beneficiaries, the longest period over which the IRA may be withdrawn is now 10 years.  Previously, a qualified beneficiary was able to take RMDs over his or her lifetime which for a young beneficiary might have meant 30 or more years.  With a few exceptions, this is no longer possible.  The IRA must be liquidated within 10 years but it can be withdrawn at any time during that 10 year period.  Below we will address what this means for using trusts as beneficiaries of IRAs.

There have been no changes to the rules surrounding spousal rollovers.  The surviving spouse may place the decedent’s IRA into a new account that behaves as if it always belonged to the survivor.  For minor children (not grandchildren) receiving an IRA, they may continue to  take out the RMD slowly until they reach the age of majority at which point they will have 10 years to liquidate the IRA.   The other exceptions are certain chronically ill or disabled beneficiaries and beneficiaries who are not more than 10 years younger than the decedent.

Planning with the SECURE Act:  To understand what the SECURE Act means for planning, one needs to understand what the planning implications are.  When an individual is named as the beneficiary of an IRA directly (not through a trust), the beneficiary gets the IRA directly, the funds are available immediately and are exposed to the beneficiary’s creditors.  Typical planning might be to designate a spouse as the primary beneficiary with the children as contingent beneficiaries.  If one of the children dies before the surviving parent, his or her children might not receive anything (if the designation was just the children it would be divided between the surviving children) or the minor grandchildren might get the IRA outright without any ability to plan for the inheritance (if the designation was, for example, descendants, per stirpes).  As a result, many planners have long recommended designating a trust under a Will as the contingent beneficiary.  This allows the IRA to be distributed to the trust and held, in some manner, in trust for the beneficiaries.  Before the SECURE Act, if properly drafted, the IRA could then be withdrawn over the lifetime of a beneficiary.  By using a trust, we put the decision to utilize the long withdrawal process in the hands of a trustee as opposed to the beneficiary.

While we can longer utilize the long payout, there are still very good reasons for designating a trust as the contingent beneficiary.  By designating a trust as the beneficiary, we keep the assets from exposure to creditors (including estranged spouses) and we keep the decision making in the hands of the trustee.  There may, however, be good reason to change the language of our trusts to accumulate the income earned by the IRA within the trust despite the fact that the trust may have to pay tax at a higher rate.  Accepting the possible increase in the taxes owed, keeping the assets in a trust allows for creditor protection, guidance by a trustee and exclusion from the beneficiary’s taxable estate.    If the trust is drafted with sufficient discretion in the trustee, designating the trust as the beneficiary will not keep the funds away from the beneficiary but rather protect the funds for the use of the beneficiary over time.

Under the SECURE Act, while the maximum withdrawal period is 10 years, significantly shorter in many instances than before the Act, there is no requirement as to how quickly or slowly the IRA must be withdrawn during the 10 year period.  This offers opportunities to manage the tax impact of the withdrawal.  For example, if the IRA is held in a trust, and the trust has the ability to tax significant deductions in a given year, that would be a good year to withdraw a larger portion of the IRA.  Conversely, if there is a year in which the trust (or individual) has a higher income, deferring any withdrawal for that year might be beneficial.  While tax planning with IRAs has always required care, under the SECURE Act there are new opportunities for planning that should be considered.

As stated at the outset, this article has focused on just a few details of the SECURE Act.  The Wealth Preservation Attorneys at PK Law would be happy to discuss the Act in further detail or to discuss the implications of the Act on the circumstances surrounding your particular planning.


Elizabeth A. Green is a Member in PK Law’s Wealth Preservation Department. Ms. Green advises individuals and families on basic to sophisticated estate planning.  She works closely with her clients in preparing the necessary documents including wills, powers of attorney, healthcare directives and various forms of trusts to ensure her clients’ estate planning needs and wishes are achieved. Her depth of knowledge in estate planning, tax and charitable planning combined with the compassion she extends is greatly appreciated by her clients who are often in crisis and in desperate need of guidance.  Ms. Green has assisted many clients in addressing the unique issues surrounding disabled and elderly family members; the difficult process of handling the affairs of a deceased family member or close friend; and business owners with succession planning, mergers and acquisitions, financing and day-to-day business concerns.  Ms. Green can be reached at 410-769-6150 or