The Setting Every Community Up for Retirement Enhancement (SECURE) Act is a bipartisan retirement bill that went into effect on January 1, 2020. The law contains many favorable provisions for retirement account owners, including removing the age limit for IRA contributions (previously limited to 70 ½) and extending the age to begin taking “required minimum distributions” (RMDs) to age 72.

However, the law substantially changes the rules regarding the inheritance of retirement accounts.  Most notably, the law eliminates the ability for most beneficiaries who inherit retirement accounts to “stretch” the taxable distributions over their actuarial life expectancies, as was previously allowed.  Under the new law, most beneficiaries must withdraw/pay taxes on the entire inherited account over a maximum window of ten years.  Certain beneficiaries are exempted from the ten-year distribution requirement: surviving spouses, minor children, disabled or chronically ill beneficiaries, and beneficiaries who are less than ten years younger than the deceased account owner. However, the ten-year rule may apply for most of these beneficiaries when they receive their portion of the account through a trust.

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