Are Your Retirement Accounts SECURED? Action Steps for Plan Participants and IRA Owners

Passed by Congress in late 2019, the SECURE Act contained the most significant changes to qualified retirement plans (QRPs) and IRAs since the Pension Protection Act of 2006.

Notably, the SECURE Act eliminated the ability of most non-spouse QRP and IRA beneficiaries to receive distributions over the beneficiary's remaining life expectancy.  

Despite the SECURE Act's dramatic impact on retirement benefits and estate plans, the onset of the COVID-19 pandemic in early 2020 and Congress's legislative responses to it largely overshadowed the Act and may have caused critical estate planning action items for QRP participants and IRA owners to slip through the cracks.  For that reason, any QRP participant or IRA owner should ensure that their estate plan is up to date and takes into account the changes made by the SECURE Act and the proposed regulations interpreting the Act that the IRS released in early 2022.

QRP participants and IRA owners should:

• Review ALL existing primary and contingent beneficiary designations for QRPs and IRAs.
• Review ANY trust (or subtrust) named as primary or contingent beneficiary, including:
• any trust for minor children intended to take effect after the death(s) of one or both parents;
• any trust for a spouse (e.g., a QTIP marital trust);
• any trust for non-disabled adult children and/or grandchildren; and
• any special or supplemental needs trust for a physically or mentally impaired beneficiary.

Any trust with retirement plan / IRA provisions, including "conduit trust" or "accumulation trust" provisions (*look for reference to Internal Revenue Code Section 401(a)(9)), and signed before 2020, should be reviewed in the wake of the Act.

Furthermore, any special or supplemental needs trust must be reviewed in light of the Act's definitions of (i) "disabled" and "chronically ill" individuals, and (ii) "applicable multi-beneficiary trust."

The application of outdated trust provisions after the death of a QRP participant or IRA owner could result in adverse income tax and/or creditor protection consequences for the beneficiaries.

Taking action now to review and possibly update an estate plan will SECURE what may be now insecure (and later expensive) if left unattended.

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© 2024 Ward and Smith, P.A. For further information regarding the issues described above, please contact Zachary F. Lamb.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

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