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How will the Secure Act affect wills and trusts?

The Secure Act was signed into law on Dec. 20. It offers expanded rules and incentives that aim to benefit part-time employees, and it will enable the owners of small firms easier ways to provide retirement plans to workers. The signing of this Act also affects the way people in New York and across the country deal with wills, trusts and other estate planning concerns.

In the past, qualified retirement account beneficiaries were allowed to withdraw funds out of 401(k) plans and other retirement accounts as they wished. Many people chose to do this over their remaining lifetimes. However, under the Secure Act, beneficiaries have only 10 years in which to withdraw all the funds from the retirement account. How they distribute the withdrawals is up to them, as long as the balance of the account is zero at the end of the 10 years.

Some, but not all, beneficiaries will end up paying significantly more taxes than they would have under previous laws that allowed them to stretch the withdrawals over many years. The impact will be more severe for individuals who are in their years of peak earning when they inherit retirement accounts. Numerous factors affect the calculation of the distribution over the 10 years, including the account balance, the age of the beneficiary and his or her life expectancy.

It might be a good idea for the holders of retirement accounts and the beneficiaries in New York to sit down with an experienced estate planning attorney. The lawyer's resources will likely include financial and tax professionals who could provide valuable advice to minimize the tax impact. It would also be an opportune time to discuss other estate planning topics, including, trusts, a last will and advance care directives. 

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