What You Need to Know
The Secure Act
By Howard Katz, CFP®, Chair AJF Advisory Committee
The Secure Act, signed into law on December 20, 2019, will usher in major changes to your retirement, estate, and charitable planning. Here are just a few of the ways it can have impact.
Prior to this tax act, non-spouse beneficiaries of IRA’s could “stretch” out taxable withdrawals over their lifetime. Now, for anyone other than your spouse, the entire taxable balance must be withdrawn by the 10th year.
This could result in significantly more taxable income for your children, or other non-spousal beneficiaries — like siblings or grandchildren — and increase tax rates and/or phaseouts of other tax benefits.
Suggestion: Take an offsetting charitable deduction with a contribution to your donor-advised fund (DAF) with Atlanta Jewish Foundation, and bank some of those unneeded dollars for future good use. Another idea is to leave your IRA to a Charitable Remainder Trust, ensuring a stream of income to your beneficiaries that can last longer than 10 years and ensure you are able to leave money to charity.
The Secure Act also potentially subjects the withdrawn assets to creditors, predators and divorce settlements much sooner than before. The requirement to withdraw the funds within 10 years also applies to grandchildren, starting at his or her age of majority!
This means an 18 or 19-year-old may now be required to take large amounts of income at a very young age. What would you have done with five or six-figure checks in your late teens or early 20’s? It’s something to think about.
With so many unintended consequences to the law, here are the relevant take-a-ways:
Please feel free to contact Christy Eckoff and launch a discussion.
- You may want to consider using IRA assets during lifetime, or at your passing, to fund your charitable donations (or spend down those assets during life). Then, use your other assets to provide for your family in a more manageable way
- Consider establishing a Charitable Remainder Trust
- These changes do not affect the IRA Charitable Rollover/QCD. You may still make a charitable contribution from your IRA if you are 70 ½ or older that counts towards your RMD
- If you have a large IRA, or other qualified retirement plan, you should prioritize a conversation with your advisors in the very near future. A lot changes in 2020!