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Proposed Legislation May Affect Retirement Plans After Death: The SECURE Act

New federal legislation has been introduced, that, if signed into law, may dramatically alter the way distributions are made under Individual Retirement Accounts (IRAs) and other qualified retirement plans. Known as “The SECURE Act”, the stated goal is to improve the nation’s retirement system. Under current law, named beneficiaries can stretch payments from IRAs and other qualified retirement plans over the life expectancy of the beneficiary. The SECURE Act proposes to eliminate the ability to stretch distributions to only an individual’s spouse and a limited group of non-spouse beneficiaries, such as minors or disabled or ill children. In almost all other cases in which a non-spouse beneficiary is named, the maximum period for payments to a designated beneficiary is limited to ten (10) years.

Additionally, the SECURE Act proposes to change age-related limitations respecting retirement accounts.

Individuals relying on an extended distribution period from retirement plans to his/her beneficiaries after death as a part of his/her estate plan may want to consider alternatives if the SECURE Act becomes law.