What is the SECURE Act and How Will it Affect Your Retirement- Here are Some Important Things You Will Need to Know About this 2020 Legislation and an Opportunity.

The Ellis Family

Setting Every Community Up for Retirement Enhancement Act, also known as the SECURE Act will make it easier for many to save for retirement. In addition, it will make retirement plans more accessible to more people. As of January 1, 2020, most changes based on this new law went into effect.

The SECURE Act pushes back the age at which traditional IRA plan participants need to take required minimum distributions from 70.5 to 72. Prior to the law being passed, non-spousal IRA beneficiaries could choose to stretch their distributions (and taxes) throughout the life expectancy with a few exceptions. Now under the SECURE Act, beneficiaries will be forced to withdraw assets within 10 years after the death of the IRA account holder, receiving larger amounts distributed over a shorter period and potentially their tax liability in that time period.

Even though the SECURE Act closed the door on the stretch IRA strategy, it opened the door for those that like the benefits of the stretch strategy and would like to support charity with a gift from their will or trust. Rather than force your heirs to take full distribution over a ten- year period, you can instead use a Charitable Remainder Unitrust (CRUIT) to provide for your family and charity. The way it works – the IRA is transferred at the death of the surviving spouse to establish a CRUT. Since the Unitrust is tax exempt, no income tax is paid when the IRA is distributed to the trust. The full IRA balance is invested and grows with time as did the IRA. A minimum of 5% or maximum 50% taxable distribution of the trust is paid to children for life OR for a term of years not to exceed 20. At the end of the trust, the remaining balance is distributed to the charity of the original IRA owner’s designation.

To summarize, this strategy grants owners of an IRA several options as it relates to the principle and distribution. 1. How long the proceeds can be spread out and 2. The interest rate the trust will pay. This will allow you to benefit both your heirs and charity(s) in a tax efficient way.

If you would like more information on how you can meet your charitable goals, call Joe Carter at 405-235-5603 or visit OCCF.org.