Tax Law Changes May Affect Existing Estate Plans

You may know that changes in applicable laws may affect the way your current estate plan documents function after your death.  While most states do not make sweeping changes to trust and estate laws often, federal tax laws change almost every year.  Most recently, the Setting Every Community Up for Retirement Enhancement Act of 2019, better known as the SECURE Act, included several provisions that could dramatically affect the way your existing plan works.

The far-reaching bill includes significant provisions aimed at increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets.  While that is all well and good in theory, there are provisions in the SECURE Act which may require changes to your estate plan, most notably to the identification of beneficiaries on your qualified retirement plans.  In light of the SECURE Act’s significant changes to certain beneficiaries’ ability to “stretch” out payments from an inherited retirement account, we recommend that you review beneficiary designations on all qualified plans, such as Individual Retirement Accounts (IRAs), 401(k) plans, or 403(b) plans with your tax and legal advisors to ensure that your beneficiaries receive the most favorable tax treatment possible after your death.

When having these discussions, it is important to consider not only tax saving strategies, but also how changes to reduce taxes on inherited qualified plan accounts could negatively impact other important components of your plan. For instance, asset management for young or incompetent beneficiaries or asset protection for beneficiaries in the event of divorce, legal trouble, or financial problems might outweigh the benefits of reducing taxes in certain situations.  The knowledgeable and helpful professionals at LLG are happy to work through these issues with you to make the best decisions possible in light of your individual situation and personal goals and wishes.