SECURE 2.0 ACT Brings Additional Estate Planning Opportunities

Attorney Rebecca Sallen recently authored an article in Sidebar Magazine, the official quarterly magazine of the Montgomery Bar Association. She wrote about how the SECURE 2.0 Act aims to bring significant changes to retirement savings laws by combining three separate bills and focusing on increasing access to retirement plans, streamlining administration and reporting requirements, and preserving retirement income. One notable impact of the new law is the change in the required beginning date for minimum distributions from IRAs. Previously set at age 70 1/2, it has been expanded to 73 years old and will further increase to 75 years old in 2033. Additionally, SECURE 2.0 reduces the penalty for failure to take minimum distributions from 50% to 25%, with the possibility of further reducing it to 10% if the error is corrected in a timely manner.

The flexibility in taking distributions provided by the SECURE 2.0 Act allows for longer periods of tax-deferred growth in retirement accounts. However, it also means that individuals will face a heftier tax upon eventual distribution from a larger IRA. The delayed starting age for required minimum distributions results in a larger distribution amount. Therefore, it is crucial to engage in proper tax planning to address anticipated minimum distributions and the recipient's expected tax rate.

Furthermore, the SECURE 2.0 Act introduces new opportunities for surviving spouses who inherit an IRA. Previously limited to a few options such as a spousal roll over or an inherited IRA, now the surviving spouse can elect to be treated as the decedent's employee. This election allows for minimum distributions based on longer distribution periods using the Uniform Life Table instead of the Single Life Table typically applied. This provision grants more flexibility and potential advantages to surviving spouses in managing inherited IRAs.

If you are interested in learning more about how the SECURE Act may affect you, please contact us to schedule a free consultation.