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Retirement and Estate Planning Under the Secure Act

Kevin Wong, Principal, Citrin Cooperman Advisors LLC / Berdon Advisors LLC

11.07.22 | T&E Chat

The SECURE Act (the Act), enacted at the end of 2019, introduced sweeping changes to retirement plans. Estate planning revolving around retirement plan benefits has changed since the Act took effect in 2020. Furthermore, the IRS is working on finalizing regulations regarding certain required minimum distributions (RMDs) to apply no earlier than 2023, which will further change the estate planning landscape.

Notable Changes

Before the Act took effect, if taxpayers who worked past age 70½ wanted to contribute to a traditional IRA, they were unable to do so. Additionally, retirement plan RMDs were required to begin for the taxpayer once they reached 70½. Plan participants that distributed less than their RMD would be penalized for 50% of the difference between the RMD and the distributed amount. When an IRA owner died, and a non-spousal heir inherited the IRA, the RMD had to be taken based on the heir’s life expectancy. This could potentially stretch the IRA over decades and continue to grow tax-deferred. This Stretch IRA strategy was once a great estate planning tool for taxpayers.

The Act has now eliminated the age cap on contributions to traditional IRAs if the taxpayer is still in the workforce and receiving compensation. With the downturn in the economy along with longer lifespans, more people are staying in the workforce longer than prior generations. The Act has also increased the age at which RMDs must start from 70½ to 72. This allows the retirement plan further time to grow its assets before the RMD kicks in.

However, not all the changes were taxpayer friendly. The Stretch IRA strategy was mostly eliminated by the Act. Instead of the RMD being based on the heir’s life expectancy, the Act replaced it with a 10-year rule. The 10-year rule requires the non-eligible designated beneficiaries to fully withdraw the IRA within ten years. Exceptions to the 10-year rule were allowed for eligible designated beneficiaries who are defined as:

  • the surviving spouse;
  • persons not more than ten years younger than the deceased IRA owner;
  • disabled or chronically ill; and
  • a child who hasn’t reached the age of majority.

For non-designated beneficiaries — charities, estates, or non-qualified trusts — the payouts will depend on the deceased IRA account owner’s death. If the IRA account owner dies after the RMD has begun, further distributions will be based on the deceased account owner’s remaining life expectancy. However, if the RMD has not begun by the IRA account owner’s death, the distributions will be based on the 5-year distribution rule, and the account must be withdrawn by the end of the five years.

In IRS Notice 2022-53, the IRS provided penalty relief for certain taxpayers who did not take a specified RMD. The specified RMD is any distribution that, under proposed regulations, would have been required in 2021 or 2022 by a designated beneficiary of a deceased IRA account owner, who died in 2020 or 2021 on or after their required beginning date, and is not taking lifetime or life expectancy payments.

Planning Opportunities

  • Converting to a Roth IRA: With the downturn of the stock market from its highs in early 2022, it is a great time to revisit converting a retirement account to a Roth IRA. This does trigger a tax in the year the conversion takes place. However, the benefits of making a conversion could outweigh the costs. There is no RMD during the owner’s lifetime, and future distributions will be income tax-free. After the owner’s death, the heirs would be subject to the 10-year rule, but distributions will still be income tax-free.
  • Charitable Donations From an IRA: If you are charitably inclined and are 70½ or over, you can direct that your IRA distribution of up to $100,000 be contributed directly to a charity. This will satisfy all or part of your RMD requirements for the year, and the amount contributed will not be included in income.
  • Designating a Trust as an IRA Beneficiary: This should be revisited to determine if the trust will be characterized as a designated beneficiary under the 10-year rule or as a non-designated beneficiary under the 5-year rule. Taxpayers should reevaluate if it still makes sense to designate a trust as an IRA beneficiary or leave it directly to the heirs.


The Act introduced several pros and cons for taxpayers, which has changed retirement and estate planning. With further regulations on the way, taxpayers should consider reviewing their retirement and estate plans. Discuss with your trusted advisor how current and proposed regulations will affect you and your estate.

Questions? I can be reached at 212.331.7441 | kewong@berdon.com or contact your Berdon Advisor

Kevin Wong is a Senior Manager in the Personal Wealth Services Group of Berdon with over 10 years of professional experience. He works closely with high net worth individuals on matters involving their personal income tax, family businesses, and fiduciary, gift and estate taxes.

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