The SECURE Act and Its Five Crucial Exceptions

ElderLawAnswers Podcast Episodes 119 and 120

In ElderLawAnswers for Attorneys Podcast Episodes 119 and 120, Mark W. Worthington, LLM (Tax), CELA, CAP, joins ELA National Director Rebecca A. Hobbs to provide a practical explanation of the SECURE Act and its impact on elder law attorneys and special needs planners.

Mark, who is Senior Counsel at Special Needs Law Group of Massachusetts, P.C., delivers a comprehensive overview of the SECURE Act and the changes it makes to planning. At the heart of the SECURE Act is the elimination of “stretch” IRAs, which allowed a named beneficiary to take distributions of the inherited IRA over his or her lifetime. Under the new law, non-spouse beneficiaries of an IRA must withdraw all the money in the IRA within 10 years of the IRA holder’s death. In many cases, these withdrawals would take place during the beneficiary’s highest tax years, meaning that the elimination of the stretch IRA is effectively a tax increase on many Americans. Mark explains that although the 10-year rule is the heart of the SECURE Act, there are five exceptions to the rule, and those exceptions are the most important element of the SECURE Act for elder law attorneys to understand.

Mark reviews each of the five exceptions in his discussion with Rebecca, but focuses on two key ones: (1) minors and (2) persons with a disability. Mark explains specific drafting techniques that should be considered when drafting trusts for minors that will be the beneficiary of retirement plans.  Mark offers tips on how to decide whether a conduit trust or accumulation trust is best for your client, and also discusses changes practitioners should be making in how they draft special needs trusts and considerations when funding these trusts.

Finally, Mark addresses practical concerns such as how to designate a revocable living trust as a beneficiary of a retirement account, and the separate account rule.

From the new default 10-year rule to who qualifies as an “eligible designated beneficiary,” Mark covers the waterfront on how the SECURE Act impacts your practice. 

To listen to Part One of Mark’s full explanation of the SECURE Act, click here.  For Part Two, click here.