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Some of us must postpone retirement while others may have to take retirement early. Over half of us have a 401k or similar workplace retirement plan, a traditional IRA or both. Regardless of how much or how little it holds, we wonder what will happen to it, to us, and to our families. These days we naturally feel insecure.

Knowing about and adjusting to the SECURE Act¹ may help.

Those of us who plan to keep working may be relieved to note that we now do not need to draw required minimum distributions from these plans until we are 72, though we can still begin withdrawing at 59 ½. We can also continue to contribute to workplace retirement plans and traditional IRAs as long as we work.

What happens when we are gone?

The rules are the same for a surviving spouse, a minor child, a person not more than 10 years our junior. The same distribution over a lifetime applies to people who are disabled (under Internal Revenue Code Section 72(m)(7), not the Social Security Act) and for people who are chronically ill (under Internal Revenue Code Section 7702B). But today no one else can “stretch” distributions over their lifetime. Instead, they must receive everything by the 10th year following your death. They must take at least what would have been your required minimum distributions during the first nine years and whatever remains in the tenth. (If no one is named as your designated beneficiary, the old rule applies: the distributions must be made by December 31st of the year of the fifth anniversary of your death or, if you had already begun to receive distributions, in annual installments over what would have been your life expectancy.) This change is estimated to increase the federal government’s tax revenues (and decrease money in taxpayers’ pockets) by $15.7 billion.

How to offset the loss to your beneficiaries

If you have a healthy 401k, 403b, 457 or traditional IRA, what can you do to offset this loss to your beneficiaries? You could buy life insurance. You could have separate discretionary trusts for retirement and non-retirement plan assets, more efficiently allocating the taxes while equalizing the benefit to your designated beneficiaries. You could create charitable remainder trusts, mimicking a lifetime stretch. If you can afford to pay the taxes now and have an adjustable gross income of less than $100,000, you could convert to a Roth IRA. A Roth IRA has no RMDs during or after your life. Distributions from a ROTH are tax free. But you can no longer convert back to a traditional IRA.

Can you name a trust as your beneficiary?

Note that you may still name a trust as your beneficiary. Just as before, your trust must be valid under state law. It must be irrevocable or become irrevocable upon your death (that is, a revocable living trust or an intentionally defective grantor trust). Just as before, the beneficiaries must be identifiable by either name or class (such as “my children”) and must be designated beneficiaries. Since a conduit (“flow through”) trust must distribute whatever it receives in the year in which it receives it, you may prefer an accumulation trust in hope of making distributions over more than ten years – if the calculations show that this will save taxes. Whatever you choose, be sure to remind your executor that a copy of the trust instrument must be provided to the retirement plan administrator by October 31 of the year following the year of your death.

Different approaches work for different people. Know your alternatives.

¹ Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE”)

Other helpful posts on retirement:

Planning for the Retirement Years: Social Security, Medicare and Long-Term Care
Revisiting Assumptions in your Retirement Assets and Estate
4 Ways to Stay in Charge of Your Finances During Retirement
Budgeting for Retirement


Elder law attorney, Terry Garrett, is a member of the National Academy of Elder Law Attorneys and is an Approved Guardianship Attorney. She assists people in elder law, estate and special needs planning, guardianship and settling estates. She graduated with honors from Cornell University. She was on the Dean’s List at Wharton Business School. She earned her J.D. at Columbia Law School, receiving the Parker Award and a Mellon Fellowship.

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