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Home » SECURE Act Accelerates Timing of Required Minimum Distributions to Beneficiaries Under Qualified Plans and IRAs

SECURE Act Accelerates Timing of Required Minimum Distributions to Beneficiaries Under Qualified Plans and IRAs

By Ian A. Herbert ‡, Paul B. McCawley & Diana Zeydel on February 5, 2020
Posted in Death and Disability Planning, Estate, Estate Planning, Estate Tax, GT Alert, Incentive Trusts, Individual Retirement Accounts, Inheritance Rights, Internal Revenue Code, IRS, Legacy Planning, Tax Planning, Trusts, Uncategorized

The Further Consolidated Appropriations Act, 2020, signed into law Dec. 20, 2019, includes a division that is known as the SECURE Act,1 which made major changes to the required minimum distribution (RMD) rules applicable to both qualified plans and individual retirement accounts (IRAs). For purposes of this GT Alert, qualified plan participants and IRA owners are sometimes collectively referred to as “participants.”

Under the new rules: (1) the age at which RMDs generally must commence during the lifetime of a participant has been pushed back from 70½ to 72; (2) a beneficiary will not be entitled to stretch the distributions out over his or her life expectancy unless the beneficiary is an eligible designated beneficiary, which is narrowly defined to include only a beneficiary who is: (a) the participant’s surviving spouse; (b) the participant’s minor child; (c) “disabled”; (d) a “chronically ill individual”; or (e) not more than 10 years younger than the participant, or a so-called “see through trust” established for the sole benefit of an individual eligible designated beneficiary; and (3) death benefits payable to “designated beneficiaries” who do not qualify as “eligible designated beneficiaries” must be paid over a period not longer than 10 years.

Because the new rules are effective in 2020, IRA owners (and participants in qualified plans) who have incorporated the so-called “stretch-IRA” approach into their retirement planning should promptly review those plans and the impact that these new rules may have.

Read the full GT Alert.

Tags: beneficiaries, beneficiary designation, conduit trust, death tax, equired minimum distribution, GT Insight, individual retirement account, IRA, retirement account, RMD, SECURE Act, survivor benefits, trusts
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Photo of Ian A. Herbert ‡ Ian A. Herbert ‡

Ian A. Herbert focuses his practice on all areas of employee benefits law. He has counseled clients on all aspects of the establishment and administration of pension and profit sharing plans, ESOPs, non-qualified deferred and executive compensation programs, equity and similar compensation plans…

Ian A. Herbert focuses his practice on all areas of employee benefits law. He has counseled clients on all aspects of the establishment and administration of pension and profit sharing plans, ESOPs, non-qualified deferred and executive compensation programs, equity and similar compensation plans, welfare benefit plans, cafeteria plans and VEBAs. In addition, he has wide-ranging experience in performing compliance reviews of qualified plan operations and assisting clients in correcting qualification and other compliance defects.

‡ Admitted in the District of Columbia. Not admitted in Virginia. Practice limited to federal tax and ERISA practice.

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Photo of Paul B. McCawley Paul B. McCawley

Paul B. McCawley is Co-Chair of the National Private Wealth Services Practice and focuses his practice on sophisticated estate planning for individuals and families. Such planning involves an overall plan for the client and the client’s family relating to the preservation and transfer…

Paul B. McCawley is Co-Chair of the National Private Wealth Services Practice and focuses his practice on sophisticated estate planning for individuals and families. Such planning involves an overall plan for the client and the client’s family relating to the preservation and transfer of wealth while minimizing income taxes and transfer taxes (estate taxes, gift taxes, and generation-skipping transfer taxes) to the extent consistent with the client’s goals. Paul is a Florida Bar Board Certified Specialist in Wills, Trusts and Estates.

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Photo of Diana Zeydel Diana Zeydel

Diana C.C. Zeydel is global chair of the Private Wealth Services Practice and focuses her practice on estate and tax planning for high-net-worth individuals and families, including intra-generational wealth transfer strategies and business succession planning. Her practice includes planning for United States and…

Diana C.C. Zeydel is global chair of the Private Wealth Services Practice and focuses her practice on estate and tax planning for high-net-worth individuals and families, including intra-generational wealth transfer strategies and business succession planning. Her practice includes planning for United States and non-United States citizens and residents. Diana also assists clients with litigated probate, trust, and guardianship matters, and represents clients before the Internal Revenue Service in matters involving fiduciary income tax and estate, gift, and generation-skipping transfer tax controversies. She represents corporate and individual fiduciaries in connection with the administration of estates and personal and charitable trusts. Diana also assists clients in preparing prenuptial and postnuptial agreements. She has participated in numerous projects involving governmental submissions in the estate, gift, and GST tax areas and serves as an expert witness in cases involving her practice areas.

Diana is a frequent lecturer and author and has spoken on a variety of topics before the American College of Trust and Estate Counsel, the Real Property, Trust and Estate Section of the American Bar Association, the Real Property, Probate and Trust Law Section of the Florida Bar, as well as various other professional organizations. She received the “Best in Wealth Management” Americas Women in Business Law Award given by IFLR/Euromoney in 2014 and 2019. She has been recognized by her peers as “a key figure in shaping the whole wealth management legal profession” and “an incredibly intelligent and creative practitioner, particularly on the tax and business restructuring side.” Chambers USA Guide.

Prior to attending college and law school, Diana was a professional ballet dancer. She received her training on a full scholarship at the Joffrey Ballet School in New York, and was awarded an apprenticeship with the Company. She instead accepted an offer to join the Chicago Ballet, where she was quickly given the opportunity to perform soloist and principal roles.

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