New Law on IRAs May Affect Your Florida Estate Plan

Whether you are still working or already retired, you may need to review and make adjustments to your existing Florida estate plan under a new federal law that went into effect in January 2020. The Setting Every Community Up for Retirement Enhancement (SECURE) Act implements key changes to many retirement plans and the rules that apply to them, particularly with respect to certain investment retirement accounts (IRA). If you do not address the recent legislation and make appropriate modifications, you could be surprised by the end result.

You should always be reviewing your estate plan periodically, and the SECURE Act provides an excellent opportunity to consult with your Dade City, FL estate planning lawyer regarding developments in the law. Some general information may also be helpful. 

Impact of the SECURE Act: There are numerous provisions of the statute that affect retirement plans, but one key section eliminates so-called “stretch” IRAs. Before it was passed, individuals could designate someone other than a spouse as beneficiary of the plan, and there were two primary benefits:

• The beneficiary could opt for required minimum distributions (RMDs) to be paid out over his or her lifetime; and,
• The beneficiary could stretch the IRA payments by passing them on to other beneficiaries upon death.

Because the RMDs were calculated according to the first beneficiary’s life expectancy, the funds held in the IRA could grow while not incurring taxes. With passage of the SECURE Act, you can still name a beneficiary who is not your spouse. However, that person is required to withdraw all funds from the IRA within 10 years after your death.

Treatment of Spouses and Certain Beneficiaries: The SECURE Act does not impact the ability of a spouse to take IRA distributions over his or her lifetime, i.e., there is no 10 year requirement. In addition, the statute treats the following non-spouse beneficiaries as if they are the IRA owner’s spouse:

• A person who suffers from a disabling or chronic medical condition;
• Someone who is less than 10 years younger than the IRA holder; and,
• Minor children, who WILL be subject to the 10 year requirement upon turning 18 years old.
  

Consider Options to Maximize Your Estate Planning: It is important to review your IRA and estate plan with your attorney, especially details regarding the following:

• If your IRA will pass into a trust, implications for any trust beneficiaries who are not your spouse;
• Disclaiming an IRA and passing it to beneficiaries who can stretch it – such as minor children; and,
• Special needs trusts, which can only be stretched if the disabled individual is the sole beneficiary.
  

Contact a Florida Estate Planning Attorney Regarding Your IRA 

When it comes to something as important as your estate plan, you should consult with a knowledgeable lawyer regarding revisions, updates, or starting from scratch. For personalized advice and information on recent legal developments, please contact the Dade City estate planning lawyers at The Law Office of Laurie R. Chane. You can call 352-567-0055 or visit our website to set up a consultation. Our office serves clients throughout Pasco County and the surrounding area, and we are happy to help.

Resource:

waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE%20Act%20section%20by%20section.pdf

https://www.chanelaw.com/4-unusual-estate-planning-laws-in-florida/