The SECURE Act and the Impact on your
Retirement and Estate Planning

The Setting Every Community Up for Retirement Enhancement Act (the “SECURE Act”), part of the Further Consolidated Appropriations Act, 2020, was signed into law on December 20, 2019. Effective as of January 1, 2020, the SECURE Act makes significant changes to the laws governing many qualified retirement plans and individual retirement accounts that can have substantial impact on your retirement planning, and estate planning and related documents. Following is a brief summary of how the SECURE Act may impact your retirement and estate planning:

Contributions to Individual Retirement Accounts (IRAs)

As a general rule, any individual with “earned income” (as defined by the Internal Revenue Service), or a non-working spouse of an individual with “earned income,” can contribute annually to an IRA. Before the SECURE Act, an individual was prohibited from making an annual contribution to an IRA beginning in the tax year that he or she turned 70½. However, the SECURE Act removed this age restriction for contributions to IRAs beginning in 2020. Therefore, as long as an individual continues to have “earned income,” regardless of that person’s age, he or she can make annual contributions to an IRA. 

Required Minimum Distributions (RMDs)

Federal law requires the owner of a tax-deferred retirement account (such as a traditional IRA) and the participant in an employer-sponsored retirement plan (such as a 401(k), 403(b) or 457 plan), or a self-employed retirement plan (a SEP), to take annual RMDs. Generally, annual RMDs are calculated based upon the value of the tax-deferred retirement account(s) and the account holder or plan participant’s life expectancy pursuant to IRS published tables. If an individual has more than one tax-deferred retirement account or participates in more than one plan, the RMD is calculated on the aggregate value of such accounts, but the owner/participant can choose to take the RMD from one or all of those accounts, as long as the annual RMD is met.

Prior to the effective date of the SECURE Act, the owner of a tax-deferred retirement account and/or plan participant was required to begin taking annual RMDs during the year in which he or she turned 70½ (with the ability to delay the distribution of the first RMD until April 1st of the following year), and each subsequent year before December 31st. However, the SECURE Act changed the required age at which a tax-deferred account owner/plan participant must take annual RMDs to age 72. This change applies to account owners who will attain age 70 ½ after January 1, 2020.

Conversion to ROTH IRA

The changes brought about by the SECURE Act have more individuals considering converting traditional IRAs to ROTH IRAs, which are not income taxable upon distribution and have no RMDs. A ROTH IRA conversion allows the holder of a traditional IRA to convert income taxable assets in the traditional IRA to a ROTH IRA, pay income taxes at ordinary federal and state rates at the time of the conversion, and move the assets into a vehicle where those assets can grow income tax free. If the income taxes paid at the time of conversion to a Roth IRA are paid from other assets, the assets used to pay the tax are removed from the taxpayer’s potentially taxable estate. There are many considerations when deciding whether to convert a traditional IRA into a ROTH IRA, but, if it makes sense depending on the account owner’s circumstances, it may be easier to do before he or she is required to take RMDs. You should discuss this option with your financial and/or tax advisor to see if it makes sense for you.

Impact on “Stretch” Distributions from IRAs and Qualified Plans

One of the most significant changes relating to IRAs and qualified assets, particularly as it relates to estate planning, deals with the income tax treatment of those assets on the death of the account owner/plan participant. Generally, if the owner/plan participant is married, he or she will leave the retirement asset to his or her spouse. If the owner/plan participant is not married, it is common to leave such assets to your lineal descendants. In any event, however, most people prefer to make these transfers as a result of the death of the account holder/plan participant in the most tax efficient manner through the utilization of a “stretch” for non-spousal beneficiaries.

A “stretch” as it related to an inherited IRA or qualified plan under pre-SECURE Act law allowed a designated beneficiary to take distributions over that beneficiary’s life expectancy, resulting in a favorable income tax deferral.

Specifically, following the death of an IRA owner or a qualified plan participant, tax-deferred assets passing to a named qualified beneficiary (a “designated beneficiary”) would be payable over that designated beneficiary’s lifetime. The designated beneficiary would receive RMDs based upon his or her life expectancy, which, in many cases, was much longer than the life expectancy of the account owner/plan participant, which allowed a small amount to be distributed each year while the remaining account balance could continue to grow income tax-deferred.  
Prior to the SECURE Act, this stretch was achievable through the use of an inherited IRA or a properly structured “see-through” trust (such as a “conduit trust” or an “accumulation trust”, both discussed further below). However, the SECURE Act’s introduction of the 10-year rule greatly impacts this planning opportunity for many beneficiaries. For many individuals inheriting an IRA or qualified plan of an individual dying on or after January 1, 2020, the SECURE Act will now require that all tax-deferred assets be distributed by the end of the tenth year following the death of the account owner/plan participant, with some exceptions.  

While no distributions of IRA or qualified plan assets need to be made during the ten-year period to those individuals that do not fall within the above exceptions, the requirement that all such assets must be distributed by the end of the tenth year following the owner/participant’s death may not align with the planning objectives and/or the owner/participant’s existing planning documents. Many individuals’ largest assets include their tax-deferred retirement funds, and, prior to the SECURE Act, it was quite common for an individual interested in protecting this large asset (with an eye on income tax deferral) to direct the asset to be held in a see-through trust upon his or her death, frequently, a conduit trust which will likely no longer achieve the objectives.

Regardless of how it is structured, if an individual has designated a trust as the beneficiary of an IRA and/or qualified assets, it is imperative that he or she review the trust’s structure and the implications of the SECURE Act on such trust with an estate planning attorney to ensure that the stated estate planning goals can still be realized in an efficient and flexible manner. It is also imperative that beneficiary designations on such assets be carefully reviewed to ensure coordination with the estate and related planning goals, particularly in light of the substantial changes brought about by the SECURE Act.


The SECURE Act includes many changes that will have a significant impact on your retirement and estate planning requiring a proactive approach to ensure that your goals are achieved. It is crucial that you review your estate planning to ensure that your goals align with the planning that is in place. Additionally, specifically as it relates to your IRAs and qualified assets, it is very important to review the beneficiary designations on such tax-deferred assets to make sure that they align with the new rules and your estate and related planning goals.