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Important updates on Individual Retirement Law

story by Melanie Witt

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act), was signed into law on December 20, 2019, by President Trump and significantly re-writes the current retirement account rules. Many people have far too few as-sets put away for retirement; this is exacerbated by the (happy) fact that people are living longer. To address this problem, the SECURE Act in-cludes provisions aimed at increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets.

Among other things, the SECURE Act pushes back the age at which retirement plan participants must start taking required minimum distribu-tions (RMDs) from 70½ to 72 (if you turn 70 ½ after December 31, 2019), and allows traditional IRA owners to keep making contributions indefi-nitely so long as they have earned income. This is helpful for the growing number of people who are now working past age 70; they can continue making IRA contributions indefinitely and put off paying income taxes on Required Minimum Distributions that they don’t need.

The SECURE Act also encourages the creation of additional retirement accounts by making it easier for small business owners to set up retire-ment plans that are less expensive and easier to administer and enables many part-time workers to participate in an employer retirement plan.

Distribution Updates

How are these new provisions going to be fund-ed? The downside of the SECURE Act changes is that while they bolster the employee or IRA owner’s ability to have more retirement assets to live on during their life, it dramatically acceler-ates the distribution (and hence recognition of income tax) to non-spouse beneficiaries after the retirement owner’s death.

Under prior law, a “Stretch IRA” allowed a beneficiary of an inherited IRA to extend distri-butions over the beneficiary’s lifetime. Starting on January 1, 2020, most retirement accounts that are not inherited by a spouse must be fully with-drawn within 10 years after the original account owner’s death. There are some exceptions to this rule, including young or disabled beneficiaries.

Everyone with retirement assets should revisit their beneficiary designations. This is especially important for anyone who has named their living trust as the beneficiary of their retirement assets.

Notice: This article is not intended to provide specific legal advice.

Melanie Witt has been a well-known estate planning and business suc-cession attorney for over 20 years. She represents cor-porate fiduciaries and individuals in estate planning, philanthropic planning, and trusts and estates and Melanie is a frequent speaker on various issues re-lated to estate planning, business succession, legal ethics, and charitable giving. Witt Law has offices in Chicago (call 312-613-6305) and Barrington (call 847-387-3946). Learn more at wittlaw.net.

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