How the New SECURE Act 2.0 Can Affect Your Estate Planning Goals

In the final days of 2022, the U.S. Congress passed a federal law known as the SECURE Act 2.0. This law addresses retirement accounts and distributions throughout the country and was signed by the president in late December. While this law primarily affects how Americans manage their personal retirement accounts, the new mandates will also affect how revocable trusts and other financial instruments can be managed.

The SECURE Act 2.0 is based on an acronym meaning Setting Every Community Up for Retirement Enhancement. According to an analysis published by a professional legal publication, a primary feature of the act is an adjustment of the minimum retirement age to begin making mandatory distributions from a 401(k) or traditional IRA account. Under the new law, retirees are permitted to wait until they turn 73 years old to begin withdrawing funds from their retirement accounts without an additional penalty. This change puts more control in the hands of retirees, permitting them to keep earning interest on their money for longer.

Another feature of the SECURE Act 2.0 is to increase the allowable amount of “catch-up” contributions to 401(k) and other accounts. Under the new scheme, people between the ages of 60 and 63 who deposited less than the maximum allowable amount earlier in life will be permitted to deposit at least $10,000 per year to their accounts, up to the maximum allowable amount. This change in the law will allow the aging population to invest money they earned or received later in life into their retirement accounts for later use without tax penalties.

The SECURE Act 2.0 also allows any parent or relative of a child who contributed to a 529 account (for college savings) to roll the balance into a 401(k) if the account has been open for 15 years and is not being used for educational expenses. With this change, the tax benefits of using a 529 account for college savings are increased further, as unused funds will not be penalized or unnecessarily taxed before their withdrawal.
The changes enacted by this new law can affect retirement and estate planning further if someone has placed a revocable trust as a beneficiary to their retirement accounts. Failure to update the trust documents in light of the new law could risk the incurrence of unnecessary taxes and penalties. Texas residents with questions about the new law and its effect on their retirement assets and estate should contact a qualified Texas trust and estate planning attorney to discuss their plans.

Experienced Houston Trust and Estate Planning Attorneys Who Know How to Help

If you or a loved one is in the process of creating or updating a will, trust, or other estate planning instrument, having sound legal advice early is the best way to avoid confusion, cost, and penalties later on. The Houston estate planning attorneys at McCulloch Miller, PLLC are skilled in a wide range of estate planning, retirement, and trust creation, and we can ensure that your assets are protected. Call a member of our team today at (713) 903-7879.



Contact Information