Structuring IRA Trusts in Estate Planning to Comply With SECURE Act and SECURE 2.0 Rules

Description

IRA trusts can provide significant estate planning benefits. The trust allows distributions to the trust beneficiaries to be extended over time thus allowing IRA distributions to the trust to be accumulated until distributions are made to the trust beneficiaries consistent with the grantor's intent. As such, in addition to serving other purposes often associated with trusts, IRA trusts may provide asset protection from creditors or divorce thus effectively extending out the protection that the IRA may provide prior to making the required minimum distributions required by law. Although IRA trusts may serve the many purposes offered by regular trusts, unique considerations are associated with IRA trusts because of the minimum distribution requirements associated with IRAs and any income taxes associated with such distributions.

Under the SECURE Act, owners of IRA accounts who implemented special trusts for the post-mortem preservation of their retirement plan assets are now subject to rules on their existing estate plan. Before the SECURE Act, beneficiaries of inherited IRAs could choose a lump sum withdrawal or stretch the withdrawal of required minimum distributions over their life expectancy. Such assets must now be distributed in full by the end of the 10th year after the owner's death. This requires careful planning to minimize taxes and protect beneficiaries.

The IRA trust, set up as the beneficiary of an IRA account, must comply with changes in IRA rules under the SECURE Act while also considering the impact of SECURE 2.0. Trust and estate counsel must understand these new rules and implement effective estate planning by modifying existing IRA trusts or structuring new ones.

Listen as our panel discusses best practices for maximizing the benefits of IRA trusts, identifies the key issues and advantages of these trusts in light of the SECURE Act, reviews the impact of SECURE 2.0, and offers effective drafting techniques.