​Long ago in a far-away land before COVID-19, Congress passed and President Trump signed the SECURE Act, Setting Every Community Up for Retirement Enhancement Act.  I also recently heard a well-respected authority on Asset Protection Planning describe the Act as Setting Every Community Up for Failure Act, and other little spins on the name.  To say that SECURE’s popularity is “checkered” would be an understatement.

Love it or hate it, we must address the changes made by SECURE.  SECURE was passed in December 2020 and it completely changes the way tax laws apply to your Retirement Accounts and how they get distributed upon your death.  SECURE also changes the landscape for how trusts can be used to protect your Retirement Accounts.

Surviving spouses and disabled individuals will not see a significant change in the tax benefits they receive.  That is not the case for other beneficiaries, which are now subject to a 10-year pay-out period subject to some limited exceptions.

Important Retirement Account distribution aspects of SECURE are:
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• The new SECURE rules retain life expectancy tax deferral for Surviving Spouses, Disabled Individuals and Minor Children** (**children not grandchildren and only while under the age of majority).
• Most other circumstances result in a 10 year pay-out period.
• SECURE generally requires the entire interest in an IRA or defined contribution plan to be distributed to a designated beneficiary within 10 years after the death of the employee, whether distributions of the employee’s interests have begun.
• A new class of designated beneficiary was created for “eligible designated beneficiaries,” which include (1) surviving spouses, (2) children who have not reached the age of majority, and (3) disabled and chronically ill beneficiaries.
• Surviving spouses can still elect to delay distributions until the end of the year that the employee (or IRA owner) would have attained age 70 ½ (or age 72, as appropriate).
• SECURE is generally, applicable to distributions for individuals who die after December 31, 2019. Certain exceptions exist (e.g., governmental plans).

You should pay particular attention to these new rules if:

1. You have a Trust to hold your Retirement Accounts when you die; or
2. If you have young or disabled beneficiaries (primary or contingent) on your tax qualified accounts,
3. If you have any non-spouse beneficiary, or
4. If you want to protect your Retirement Accounts from your beneficiary’s Creditors, Predators, Divorcing Spouses and Estate Taxes

We have also seen some positive Retirement Account legislation in the CARES Act response to the COVID-19 pandemic.  CARES provides relief from required distributions, as well as penalty-free emergency access in certain circumstances.  Penalty free access to these funds and the ability to allow assets to continue growing tax deferred are important benefits you may be able to utilize.

Retirement Account Succession Planning is essential and the SECURE Act makes it essential to review your designations and ensure they are coordinated with your Estate Plan.

COVID-19 has spurred many people to consider the necessities in life and being sure they have all their needs covered.  Top of the list items are things like toilet paper, hand sanitizer, food staples, and the list goes on.  But, have you taken a look at what may be called upon to meet your largest necessity in the event that true disaster strikes….your life insurance.

We have seen many estate plans and estate administrations blessed by life insurance, as well as those that do not incorporate this essential piece of personal wealth.  Each and every client should not only utilize life insurance, but you should incorporate it into your estate plan and review it periodically.

Your Estate Plan is dynamic and changes with your needs and circumstances over time, and your life insurance is no different.  Part of your regular review process should include reviewing the performance and appropriateness of your life insurance.  If you have a Trusted Advisor that helps you with your life insurance, your regular review process should involve collaboration between your Trusted Advisors.
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You took great care crafting your Estate Plan to reflect your wishes, and it is critical to ensure that you receive the liquidity you are expecting in order to make these documents work as they were designed. It is important to review and update your beneficiary designations.  If you have established a trust for your spouse or family, your life insurance should be coordinated with your Estate Plan.  Best laid plans and good intentions do not always result in the desired outcome.  Asset Alignment is a critical and proactive part of the planning process, designed to ensure that your life insurance is incorporated into your Estate Plan.

Why should you want to review your life insurance? There are three main reasons:

1)  Since you implemented your plan, your life has changed and possibly laws have changed. You want the level of funding you have to match what you need. You may need more, you may need less.
2)  The life insurance industry has changed. All companies have adopted new mortality tables that have reduced the costs in newer policies. Even if you are older, the cost of a newer policy may be less expensive for you, and
3)  Most life insurance policies have moving parts inside that are affected by the economy, specifically interest rates and the stock market, depending on the type you purchased. These moving parts may affect what your family receives and we should make sure that the performance is in line with what you were promised when you originally bought the policy.

Click here or call my office to schedule your planning review. If you are not sure whether this applies to you, please contact us and I will help you figure it out. I cannot stress enough how important this is. Even if you purchased your life insurance outside of any planning we did together, we should sit down and make sure you have everything you think you have.