Your retirement distributions can be significantly affected by the new SECURE Act.
The Act has created a new category of beneficiaries: The Eligible Designated Beneficiaries or EDB. Before the Act we simply had “beneficiaries”, “designated beneficiaries” and “spouse designated beneficiary”.
The non-EDB beneficiaries will have to receive the retirement accounts within 5 or 10 years depending whether they are beneficiaries or designated beneficiaries.
There are 5 categories of EDB beneficiaries: (1) surviving spouse, (2) minor children, (3) disabled beneficiary, (4) chronically ill individual, and (5) less than 10 years younger beneficiary. The distribution of the retirement accounts can be stretched for all of these categories. However, for the minor child, the stretch terminates when the child reaches the age of majority (18 in the DC metro area).
Many estate plans will need to be revised to adjust to these new categories of EDB and the increase in income tax liability. For instance, having a common trust for minor children may prevent the stretch of a retirement account since children will reach the age of majority at different times unless they are twins.
The Act may mean a new strategy, or at least an adjustment, for your retirement plan. If you would like assistance with this or have any questions, please don't hesitate to contact us.
Sincerely,
Yahne
