Understanding The Co-relation Between Secure Act Will & Estate Planning

Estate Planning Blog: How A Secure Act Will and Estate Planning Go Hand-In-Hand

Introduction

The first thing we need to do is discuss what each of these two is. A Secure Act Will is also known as the “Setting Every Community Up For Retirement Enhancement” Act. It sounds like a good idea in sound and principal, but there have been a few changes made to it lately.

The one main downside is with a loophole that currently allows a beneficiary to draw on the account, even when the person is still alive. Due to the new regulations, that is no longer possible. Chief among the loopholes is the “Stretch IRA.”

Under previous laws, the spouse could defer the tax status of the IRA or other retirement accounts until at least ten years after their other half dies. Now, with the new rules, that is no longer possible.

That also means a retirement account cannot be passed down through the generations, disregarding the tax status. Under previous laws, the beneficiary could enjoy tax-free growth, and thereby, pass it on down through the later generations. That is no longer possible.

You can read more about the Secure Act Will at https://money.usnews.com/money/retirement/iras/articles/what-is-the-secure-act.

What is Estate Planning?

Estate planning is when you plan to make sure those who outlive you are set for life. That can include anything from the last will items to the retirement accounts.

How do the two interrelate?

Here you will find at least six ways the Secure Act Will and the Estate Planning work hand-in-hand.

Some of them you might find beneficial and others you might not.

1)Employee Options

You will be able to offer your employees more options, particularly when you have a small business. That means they will have more retirement options for their families. That also means that your employees can take care of their families better than they could before. They just have to adjust their will to include the options.

2)The Retirement Age

Retirement age used to be set at 65 years of age. Now, they have raised it to 70 years of age. That means that some of us will have to wait a little longer to retire. it could also mean the tax options that we once had might not be there now. You could pay more in taxes every year, instead of deferring it to later. That also affects the Secure Act. Since you cannot stretch it out anymore, your families might have to pay down some of the taxes before they see a dime.

3)Tax Credit

Did you know there is a new tax credit for automatic enrollment for your retirement account? Some people could see a $500 credit in their taxes next year. The extra money can get rolled into the other accounts. It will give you a little something extra to leave your family in your will once you have passed on.

4)Birth Distributions

There is a new code that allows for a tax-free distribution for births and adoptions. Now, you do have to qualify for the credit, but you can get up to $5,000 free of penalties, which can be added to your accounts. The distribution also has to happen within one year of the adoption going through or the birth occurring. In other words, you cannot bide your time to strike when the iron is hot.

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