Understanding the SECURE Act: How It Changed Retirement and Estate Planning

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019, made the most significant changes to retirement account rules in decades. While many provisions were designed to help Americans save more effectively for retirement, the law also dramatically changed how inherited retirement accounts—like IRAs and 401(k)s—are treated.

These changes have major implications for estate planning, tax planning, and trust planning, especially for families who plan to leave retirement accounts to children or other heirs.

The End of the “Stretch IRA” for Most Beneficiaries

Before the SECURE Act, many beneficiaries who inherited retirement accounts could take required minimum distributions (RMDs) over their life expectancy. This strategy was often called the “stretch IRA.”

Stretching distributions over decades allowed beneficiaries to:

• Keep funds growing tax-deferred
• Spread out income taxes over many years
• Preserve wealth across generations

The SECURE Act largely eliminated this strategy for most non-spouse beneficiaries.

Instead, most inherited retirement accounts must now be fully distributed within 10 years of the account owner’s death.

The New 10-Year Rule

Under the SECURE Act, most beneficiaries must withdraw the entire inherited IRA by December 31 of the tenth year following the account owner’s death.

This rule applies to most beneficiaries, including:

• Adult children
• Grandchildren
• Friends or other individuals

In some cases, beneficiaries may also have to take annual required minimum distributions (RMDs) during years 1 through 9 if the original account owner had already begun taking RMDs before death.

The result is that retirement assets may now be taxed much more quickly, potentially pushing beneficiaries into higher tax brackets.

Who Is Exempt From the 10-Year Rule?

The SECURE Act created a category called Eligible Designated Beneficiaries (EDBs) who can still stretch IRA distributions over their life expectancy.

These include:

• Surviving spouses
• Minor children of the account owner (until age 21)
• Disabled individuals
• Chronically ill individuals
• Individuals who are not more than 10 years younger than the account owner

Once a minor child reaches age 21, the 10-year rule begins.

Special Planning for Disabled Beneficiaries

One of the most important exceptions involves disabled beneficiaries.

If an IRA is left to a disabled individual, distributions may still be taken over the beneficiary’s life expectancy rather than within 10 years.

This exception is particularly important for families who use Special Needs Trusts to protect a disabled beneficiary’s eligibility for government benefits such as SSI or Medicaid.

A properly structured Special Needs Trust can allow retirement account distributions to stretch over the beneficiary’s lifetime while still preserving benefit eligibility.

How the SECURE Act Impacts Trust Planning

Many estate plans name a trust as the beneficiary of an IRA to provide asset protection and oversight.

However, trusts must now be carefully drafted to work properly with the SECURE Act.

In general:

• Most trusts receiving retirement accounts are still subject to the 10-year rule.
• Certain trusts for disabled beneficiaries may qualify for life-expectancy distributions.

Poorly drafted trusts can unintentionally accelerate distributions and create large tax liabilities.

Other Key Changes in the SECURE Act

The SECURE Act also introduced several other retirement-related reforms, including:

Raising the age for required minimum distributions

The starting age for RMDs increased from 70½ to 72 (later raised to 73 under SECURE Act 2.0).

Eliminating the age limit for IRA contributions

Individuals can now contribute to traditional IRAs regardless of age, as long as they have earned income.

Expanding retirement plan access

The law encourages employers to offer retirement plans and allows certain long-term part-time employees to participate in workplace retirement plans.

Why the SECURE Act Matters for Estate Planning

Because retirement accounts are often among the largest assets in an estate, the SECURE Act has forced many families to rethink their estate planning strategies.

Without careful planning, inherited retirement accounts may now be:

• Taxed faster
• Distributed sooner
• Less effective for long-term wealth preservation

Families should review their beneficiary designations, trust structures, and tax strategies to ensure they are aligned with the new rules.

The Bottom Line

The SECURE Act fundamentally changed how inherited retirement accounts work. While the law expanded retirement savings opportunities for workers, it also accelerated taxation for many heirs.

For families with significant retirement assets—or those planning for beneficiaries who need asset protection or special needs planning—reviewing estate plans under the new SECURE Act rules is essential.

Understanding the SECURE Act: How It Changed Retirement and Estate Planning

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019, made the most significant changes to retirement account rules in decades. While many provisions were designed to help Americans save more effectively for retirement, the law also dramatically changed how inherited retirement accounts—like IRAs and 401(k)s—are treated.

These changes have major implications for estate planning, tax planning, and trust planning, especially for families who plan to leave retirement accounts to children or other heirs.

The End of the “Stretch IRA” for Most Beneficiaries

Before the SECURE Act, many beneficiaries who inherited retirement accounts could take required minimum distributions (RMDs) over their life expectancy. This strategy was often called the “stretch IRA.”

Stretching distributions over decades allowed beneficiaries to:

• Keep funds growing tax-deferred
• Spread out income taxes over many years
• Preserve wealth across generations

The SECURE Act largely eliminated this strategy for most non-spouse beneficiaries.

Instead, most inherited retirement accounts must now be fully distributed within 10 years of the account owner’s death.

The New 10-Year Rule

Under the SECURE Act, most beneficiaries must withdraw the entire inherited IRA by December 31 of the tenth year following the account owner’s death.

This rule applies to most beneficiaries, including:

• Adult children
• Grandchildren
• Friends or other individuals

In some cases, beneficiaries may also have to take annual required minimum distributions (RMDs) during years 1 through 9 if the original account owner had already begun taking RMDs before death.

The result is that retirement assets may now be taxed much more quickly, potentially pushing beneficiaries into higher tax brackets.

Who Is Exempt From the 10-Year Rule?

The SECURE Act created a category called Eligible Designated Beneficiaries (EDBs) who can still stretch IRA distributions over their life expectancy.

These include:

• Surviving spouses
• Minor children of the account owner (until age 21)
• Disabled individuals
• Chronically ill individuals
• Individuals who are not more than 10 years younger than the account owner

Once a minor child reaches age 21, the 10-year rule begins.

Special Planning for Disabled Beneficiaries

One of the most important exceptions involves disabled beneficiaries.

If an IRA is left to a disabled individual, distributions may still be taken over the beneficiary’s life expectancy rather than within 10 years.

This exception is particularly important for families who use Special Needs Trusts to protect a disabled beneficiary’s eligibility for government benefits such as SSI or Medicaid.

A properly structured Special Needs Trust can allow retirement account distributions to stretch over the beneficiary’s lifetime while still preserving benefit eligibility.

How the SECURE Act Impacts Trust Planning

Many estate plans name a trust as the beneficiary of an IRA to provide asset protection and oversight.

However, trusts must now be carefully drafted to work properly with the SECURE Act.

In general:

• Most trusts receiving retirement accounts are still subject to the 10-year rule.
• Certain trusts for disabled beneficiaries may qualify for life-expectancy distributions.

Poorly drafted trusts can unintentionally accelerate distributions and create large tax liabilities.

Other Key Changes in the SECURE Act

The SECURE Act also introduced several other retirement-related reforms, including:

Raising the age for required minimum distributions

The starting age for RMDs increased from 70½ to 72 (later raised to 73 under SECURE Act 2.0).

Eliminating the age limit for IRA contributions

Individuals can now contribute to traditional IRAs regardless of age, as long as they have earned income.

Expanding retirement plan access

The law encourages employers to offer retirement plans and allows certain long-term part-time employees to participate in workplace retirement plans.

Why the SECURE Act Matters for Estate Planning

Because retirement accounts are often among the largest assets in an estate, the SECURE Act has forced many families to rethink their estate planning strategies.

Without careful planning, inherited retirement accounts may now be:

• Taxed faster
• Distributed sooner
• Less effective for long-term wealth preservation

Families should review their beneficiary designations, trust structures, and tax strategies to ensure they are aligned with the new rules.

The Bottom Line

The SECURE Act fundamentally changed how inherited retirement accounts work. While the law expanded retirement savings opportunities for workers, it also accelerated taxation for many heirs.

For families with significant retirement assets—or those planning for beneficiaries who need asset protection or special needs planning—reviewing estate plans under the new SECURE Act rules is essential.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019, made the most significant changes to retirement account rules in decades. While many provisions were designed to help Americans save more effectively for retirement, the law also dramatically changed how inherited retirement accounts—like IRAs and 401(k)s—are treated.

These changes have major implications for estate planning, tax planning, and trust planning, especially for families who plan to leave retirement accounts to children or other heirs.