SECURE Act: 6 Updates and Why They Matter
Retirement assets are often the largest—and commonly the most challenging—piece of an estate plan.
In case you missed it, this summary of your “SECURE Act: Terminology and Planning” on-demand seminar features well-known Michigan practitioner Amy N. Morrissey and highlights some of the key takeaways for navigating this continually confusing landscape.
1. RMD Age: Know the Applicable Age
What you need to know now: SECURE 2.0 changed the fixed age for commencing required minimum distributions (RMD) to an applicable age. The SECURE Act first increased the age for commencing RMDs from 70½ to 72, and SECURE 2.0 further increased the age to 73 (starting 2023) and 75 (starting 2033). In practice, look for the client’s applicable age to determine when RMDs must begin.
2. RBD + 10-Year Rule: Don’t Wait Until Year 10
What you need to know now: The required beginning date (RBD) generally remains April 1 of the year after the account owner reaches the applicable age. For general designated beneficiaries who die on or after their RBD and are subject to the 10-year rule, the “at least as rapidly” rule still applies under the final regulations. This means that RMDs are required during years 1 through 9 of the 10-year period and the entire balance must be fully distributed by the end of year 10.
3. EDBs: Who Can Still Use Pre-SECURE Act Stretch Rules
What you need to know now: The SECURE Act created a new class of eligible designated beneficiaries (EDB), who are designated beneficiaries that are designated affirmatively by the account owner, by the plan itself, or by the account agreement, with an additional carveout. EDB are allowed to use the pre-SECURE stretch rules for stretching over life expectancy. The most common EDBs include:
• Surviving spouse
• Minor child of the account owner
• Disabled or chronically ill beneficiary
• Individual who is no more than 10 years younger than the account owner
4. EDBs: See-Through Trust Rules Still Apply
What you need to know now: To achieve designated beneficiary or EDB status, the trust must be a see-through trust. The see-through trust rules still apply, meaning that
• the trust must be valid under state law,
• the trust must be irrevocable at the death of the account owner,
• a copy of the trust must be supplied to the administrator of an employer-sponsored plan by October 31 of the year following the account owner’s death (if the beneficiary is chronically ill or disabled, this is also the deadline for documentation), and
• the beneficiaries must be identified.
5. Conduit Trust Versus Accumulation Trust: Understand the Difference
What you need to know now: A conduit trust is a conduit for the payment of the retirement benefits. It is a see-through trust that all distributions from the retirement plan to the trustee will pass through, including RMDs and other withdrawals. An accumulation trust is any see-through trust that is not a conduit trust. This terminology is key. A conduit trust is the only type of trust that will allow a surviving spouse to be an EDB.
6. AMBTs: Getting Disability Planning Right
What you need to know now: There is now the option to use a separate account status for each beneficiary of a trust—an applicable multi-beneficiary trust (AMBT). An AMBT is a trust in which
• there is more than one beneficiary,
• all the beneficiaries are designated beneficiaries, and
• at least one of the designated beneficiaries is an EDB due to being chronically ill or disabled.
Final Thoughts
When SECURE 2.0 issues come up, the consequences can be big and expensive. Reviewing the Act carefully, documenting deadlines, and identifying beneficiary status correctly all help prevent accelerated payouts, missed distribution obligations, and unintended tax results. Smart planning (and administration) means treating retirement assets as a specialized track, not a routine checkbox.
Want More?
This summary of ICLE resources was created with the assistance of AI.