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Naming A Trust As An Ira Beneficiary Post-secure Act

On Behalf of | Aug 10, 2021 | Firm News

The SECURE Act, which was passed by Congress and made effective as of January 1, 2020, made substantial changes to the way Americans are able to save for retirement, and the way the planning considerations they now have to take into account when making beneficiary designations for their IRA accounts. Most notably, with the exception of so-called “Eligible Designated Beneficiaries” (e.g., surviving spouses and minor children), the ability to “stretch” required minimum distributions (“RMDs”) over a named beneficiary’s lifetime has been eliminated and replaced with a 10-year rule, requiring that the entirety of a beneficiary’s inherited IRA account balance be withdrawn within 10 years of the account owner’s death.

Whereas many clients previously elected to designate so-called “see through” trusts with conduit provisions, which require that RMDs be taken by the trust and then distributed to the beneficiary (to ensure the beneficiary can use his/her life expectancy to calculate those RMDs), the elimination of “stretch” planning has many clients opting instead for so-called “accumulation” trusts as their IRA beneficiaries. Simply put, an accumulation trust is a variety of see through trust that allows the Trustee to accumulate RMDs rather than distribute them to the beneficiary. In doing so, the RMDs received by the trust can be retained in trust for asset protection planning and long-term estate tax planning purposes, and for any other purpose the client might find advantageous. This is a particularly useful strategic planning tool for clients whose net worth consists largely, or even primarily, of IRA or other retirement account holdings.

For more information concerning whether an accumulation trust may provide benefits to you and your family as part of your own estate plan, please contact John R. Tullio, Jr. at 216-621-7860, or by email at [email protected].

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