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There Is no Grand Strategy To Beat SECURE. We Are in Damage Control!

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By Mike Hoffman, Esq., CPA

In the summer of 2019, President Trump signed into law the Setting Every Community Up For Retirement Enhancement or SECURE Act.  By now everyone has heard that the SECURE Act, which went into effect January 1, 2020, eliminated the “stretch IRA” allowing non-spousal beneficiaries to withdraw assets from an inherited IRA over their life expectancies. And as I wrote last year (click here), the SECURE Act imposed a ten-year rule for inherited IRAs throwing a ringer into many taxpayer’s financial and estate planning.  The IRS gets their money sooner but it can be worse than that!

Many of us have watched and nurtured our retirement accounts over decades, with the promise that not only will the balances grow tax free until withdrawn, but withdrawals can take place over our lifetimes, and our children’s lifetimes. The ten-year requirement at our children’s level could easily be messed up and trigger a five-year payout. All beneficiary designations should be reviewed in light of the new rules under the SECURE Act.

Paying ordinary income tax rates on an IRA is a huge economic loss.  For instance, in Georgia (an income tax state), a $1 million IRA would incur over $450,000 of tax and throw all of your other income into higher tax brackets.  Whether that tax is paid by your children over 5 years or 10 years (or at the end of the 5th year or 10th year) is a big deal.  Ensuring the 10-year payout option is critical and more diligence should be given to possible Roth conversions.

For those who had designated trusts as beneficiaries of IRAs for spouse (maybe it was a second marriage) or children (whether minors or not), those trusts which were intended to secure and protect retirement assets are probably going to fail the purposes and objectives desired, and may even backfire to cause a required shorter payout. “Conduit Trusts” need to be re-examined to determine whether an “Accumulation Trust” is the structure desired to protect the retirement assets from mismanagement, creditors and the like. Significant consideration needs to be given to the compressed income tax rates of trusts, i.e., maximum tax rate at $13,050 of taxable income for trusts, compared with $628,301 for married filing joint.

Keep in mind that retirement assets not only are included in your taxable estates, the distributions also are subject to federal and state income tax. Yes, that is double taxation.  When you line up a retirement account with other assets that will be inherited by family members, the retirement accounts become less attractive. This may cause some to re-evaluate their estate planning concerning their retirement accounts, particularly when it comes to the security of older relatives and taking care of charities.

Needless to say, every situation is different. The rules are very complicated. Talk to your tax advisor and discuss your planning with your financial advisor and estate planning attorney.


For more information regarding the SECURE Act or any other estate planning or tax concern, please contact us at 404-255-7400 or email us at info@hoffmanestatelw.com.


  • Mike Hoffman

    Mike is the founding and managing partner of Hoffman & Associates and oversees the general operations and personnel of the firm. He works primarily in the estate planning practice helping clients minimize the effect of the estate tax, ensure orderly transition of generations in family businesses, and maximize asset protections. Mike also devotes a considerable amount of his efforts to the business law and tax planning needs of the firm’s clients. He is licensed to practice in the States of Georgia, Ohio, and Tennessee, and is a Certified Public Accountant.

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