This year introduced huge changes in the law that benefits disabled or chronically ill beneficiaries. The Setting Every Community Up for Retirement Enhancement (SECURE) Act integrates into the Further Consolidated Appropriations Act of 2020. The SECURE Act introduced big new to the special needs planning community. It carved out special considerations relative to inheriting retirement accounts. These apply to beneficiaries classified as disabled or chronically ill.
SECURE Act for Disabled or Chronically Ill
Before law changed, almost anyone could inherit a retirement account. What’s more, the recipient could secure distributions in installments from the account over their life expectancy. Thus, these would allow funds to sit in a tax-deferred account and accumulate wealth. However, the exception includes the trustee to distribute a required amount each year. Thus, the SECURE Act drastically decreased which individuals could stretch distributions over their life expectancy.
- Entitled beneficiaries must withdraw the funds within either 5 or 10 years. This doesn’t allow funds to grow.
- Under the new rules of the SECURE Act, one category of individuals still entitled to the financial benefit of stretching distributions from the account over their life expectancy. This includes disabled or chronically ill beneficiaries.
- This is a huge benefit and advantage for those disabled or chronically ill beneficiaries, possibly over other beneficiaries you may have.
SECURE Supplemental Needs Trusts (for Disabled or Chronically Ill)
In response to the new law changes, your estate planning attorney can create a special trust to best provide for these beneficiaries. The SECURE Supplemental Needs Trust provides for the maximum benefit of the law for disabled or chronically ill beneficiaries.
This type of trust allows retirement account benefits to collect a maximum stretch under the law. Therefore, the beneficiary stretches the distributions from that retirement account over their life expectancy. This allows funds in the retirement account to continue accumulating and growing.
About a SECURE Supplemental Needs Trust
- Allows for a care manager or advocate to look out for a beneficiary after they die.
- Protects asset protection from creditors, divorce, or other bad actors.
- Offers peace of mind since it provides for beneficiaries for years to come.
You might benefit from this new law and new SECURE Supplemental Needs Trust, if you:
- Have a disabled or chronically ill beneficiary.
- Keep a retirement account, such as a 401k or IRA.
- Make sure your retirement account receives maximum tax advantages after your death.
You make sure your retirement account receives maximum tax advantages after your death.
About Skvarna Law in Glendora and Upland, California
Skvarna Law Firm operates offices in Glendora and Upland, California. Also, we provide legal services. We cover San Bernardino, Los Angeles, Orange, and Riverside Counties. This includes several cities. Upland, Ontario, Rancho Cucamonga, Fontana, Colton, Rialto, Chino, Chino Hills, Glendora, Claremont, Pomona, La Verne, Montclair, San Dimas, Azusa, Covina, West Covina, Diamond Bar, Walnut, La Puente, Corona, Norco & Mira Loma.
