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SECURE Your Future: What You Need to Know About the SECURE Act and Your Estate Plan

SECURE Your Future: What You Need to Know About the SECURE Act and Your Estate Plan

By Morris Sabbagh, Esq.

The “Setting Every Community Up for Retirement Enhancement Act”—SECURE Act—passed at the end of 2019, made major changes for owners of IRAs and other qualified retirement plans.

Most of the public attention has been directed at the change to the age owners must start drawing down their accounts (“required beginning date”), now 72 instead of 70 ½. But it’s the Act’s effect on estate planning for retirement accounts that’s the biggest game changer.

If you have significant holdings in qualified retirement accounts, here’s what you need to know.


Before the SECURE Act, individual beneficiaries and properly structured trusts named as beneficiaries could withdraw accounts over the beneficiary’s life expectancy (or that of the oldest beneficiary). Thus, they could defer (“stretch”) the income tax over the beneficiary’s lifetime, allowing the balance in the account to compound tax-free.

Under the SECURE Act, most designated beneficiaries will be required to withdraw the entire account and pay income taxes within 10 years of the account owner’s death. The account doesn’t have to be withdrawn evenly over the 10-year period, but will have to be withdrawn in full by the period’s end.


Before the SECURE Act, for a trust to be named beneficiary of a retirement account and then stretch distributions over the lifespan of the trust beneficiary, it had to qualify as a “see-through trust,” of which there are two types: conduit trusts and see-through accumulation trusts.

Under the SECURE Act, in most cases these trusts can only stretch distributions up to 10 years following the account owner’s death. This can have serious implications, especially in the case of conduit trusts; these are now required to both withdraw and distribute the entire account to the beneficiaries by the end of the 10-year deferral period.

Large or lump sum payments can expose beneficiaries to financial risks like imprudent spending or investing, divorce, lawsuits, etc., the very risks the account owner likely meant to avoid by setting up the trust.

See-through accumulation trusts allow the money to stay in the trust even after the IRA is withdrawn, but can have negative tax consequences. Since generally trusts are subject to higher income tax rates than individuals, when the account is withdrawn within 10 years instead of being paid out over a long period of time it’s likely to be taxed more heavily than if the account was paid directly to the trust beneficiary.

The takeaway is that anyone who created (or intends to create) a trust for retirement benefits should consult with their trusts & estates attorney to determine whether changes need to be made, as well as discuss other planning alternatives.


Certain beneficiaries are not subject to the new 10-year SECURE Act payout rule. The following “eligible designated beneficiaries” are permitted to withdraw over their life expectancies:

  • The surviving spouse of the account owner.
  • Chronically ill beneficiaries.
  • Disabled beneficiaries.
  • Minor children of the account owner. (However, they’re subject to the 10-year rule starting from the age of majority. For example, in a state where the age is 18 the account will have to be distributed in full by age 28.)
  • Beneficiaries who are less than ten years younger than the account owner.

Despite the SECURE Act changes, qualified retirement account owners may not want, or be able to, name their designated beneficiaries outright. They should speak to their trusts & estates attorney about structuring a trust that will allow for the stretch payout.

The tax and other consequences of the SECURE Act are major and should not be ignored. If you have any questions about how it may affect you or your beneficiaries, please contact us.

Morris Sabbagh is a partner in Vishnick McGovern Milizio’s Tax, Trusts & Estates, and Elder Law Practices. He focuses on assisting families with the preservation of wealth and administration of estates, as well as high-net-worth individuals to prevent the dissipation of assets to taxes and long-term care expenses.

He can be reached at msabbagh@vmmlegal.com and 516.437.4385 x120