Trust and Estate Bulletin | December 27, 2021

Question: When was the last time you checked your beneficiary designations on your Retirement Accounts?

Changes in the tax laws in recent years have made revisiting your beneficiary designations something that should be done more regularly.  Not only do you want to be sure those designations are consistent with your overall estate planning wishes, it is important to confirm that your designations dovetail with the rest of your estate plan and meet the requirements of the ever-changing tax rules.

For example, the SECURE Act (effective January 2020), changed the rules requiring distributions from retirement accounts to a non-spouse beneficiary. Inherited IRA distributions generally must now be taken within 10 years.  If you have named a trust or sub-trust as a beneficiary of a retirement plan, you may want to modify the language of your trust to take into account this new “10-year rule.”  That is because the changed law alters what may seem to be the “optimal” payout of retirement plan benefits to a beneficiary.  Modification may also be necessary to avoid negative tax consequences that could result when a non-person (entity) is, or could be, a recipient of IRA distributions.  A review of your estate plan, including beneficiary designations, by your attorney will help determine if any changes or updates should be made as a result of the changes in the applicable tax law.

Other changes in circumstances warrant revisiting of your beneficiary designations, such as a child having outgrown the need for a sub-trust for his or her benefit.  For these reasons, we want to encourage you to contact your estate planning attorney to discuss whether any updates to your estate plan need to be made.

Spaulding McCullough & Tansil LLP
SMT Estate Planning Team

Albert G. Handelman | Kevin J. McCullough | Carmen D. Sinigiani | Barbara D. Gallagher | Mark A. Miller | Candice L. Raposo | Ashlee M. Hellman