If you have done any estate planning, you are likely well aware that the estate plan that you made or are making is subject to things that are beyond your control. For example, your estate planning attorney likely talked with you about estate tax as well as any income tax provisions that are relevant to the ways that you chose to plan for the management of your financial and other assets during your lifetime and after you pass away. Some of you may have noticed that tax changes passed in recent years affect estate plans that you made, and you may have worked with your estate planning attorney and perhaps a tax advisor to update your plan so that it makes sense in light of the changes to the tax code.
Other political decisions can also affect estate plans. Recently, the United States House of Representatives put its stamp of approval on a piece of financial legislation called the SECURE Act. Contained within the provisions of that Act is at least one thing that Americans must be aware of which could affect their estate plans if they own a particular type of financial asset called the Stretch IRA.
A Stretch IRA is a type of individual retirement account (IRA) that allows the beneficiaries who inherit it to spread out the distributions they are to receive from it over their lifetime instead of over a short term schedule or all at once in a lump sum like happens with many IRAs. If Congress passes the SECURE Act and it becomes law, Stretch IRAs will be eliminated. They would be replaced with a ten-year payout schedule for all non-spouse beneficiaries, including trusts. There is a high likelihood that Congress will pass the SECURE Act, as it has long been skeptical of the practice of using IRAs as estate planning vehicles, choosing instead to support programs and policies that encourage their near-exclusive use as a retirement funding tool. It is also possible that Congress could pass its own version of the SECURE Act, which could contain an even shorter payout timeline.
If you have a Stretch IRA and you have designated non-spouse individuals or a trust as the beneficiaries of it, you may want to rethink that part of your estate planning strategy. If some of your estate planning goals are to control the income of beneficiaries or provide income for your beneficiaries over the long term, there are likely other ways that you can accomplish those goals. You and your estate planning attorney may want to work with a financial advisor who has in-depth knowledge of the financial products that are currently available. It is possible that there is another way that you can accomplish the same goals through a different financial vehicle, such as life insurance, which can have a trust as its designated beneficiary.
The political and financial rules that affect estate planning are subject to change. However, your estate planning attorney can help you accomplish your estate planning goals by making updates to your plan as circumstances create a need for adjustments. Wichita estate planning attorney J. Joseph Weber is here to serve you. Call us to reserve an appointment today at 316-265-7802, or contact us online.