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TOP 3 ESTATE PLANNING ATTORNEY IN TUCSON
UPDATING YOUR ESTATE PLAN
IN RESPONSE TO THE SECURE ACT
The SECURE Act, signed into law on December 20, 2019, is the most impactful legislation to affect estate planning in decades. Although the SECURE Act includes many positive changes in regard to tax-deferred retirement accounts, it no longer permits most non-spouse beneficiaries (e.g., children) to withdraw an inherited retirement account over the beneficiary’s life expectancy (aka “stretch IRA”). Instead, the default law now requires the entire account to be withdrawn and liquidated by the end of the 10th year after the death of the account owner (“10-year liquidation rule”). This change has major implications when considering whether to name an individual or trust as beneficiary of a retirement account.
The 10-year liquidation rule results in the acceleration of income tax due, possibly causing a beneficiary to be bumped into a higher income tax bracket and receiving less of the funds contained in the retirement account than under the prior law. However, the SECURE Act does provide a few exceptions to the usual rule that are available to surviving spouses, beneficiaries less than 10 years younger than the account owner, minor children, and disabled individuals. But these exceptions only complicate the analysis because your estate planning objectives likely include more than just tax considerations. For example, you might be concerned with protecting a beneficiary’s inheritance from future creditors and ex-spouses or preventing your spouse from disinheriting your children upon the spouse’s remarriage. All these issues should be considered simultaneously when naming beneficiaries of a retirement account.
If your estate plan currently names a trust as primary or secondary beneficiary of a retirement account (e.g., IRA, 401k, TSP), then you should reconsider whether this is still appropriate after the SECURE Act, and if yes, determine what type of trust to use.
As a courtesy, I have written an article, "Decision Tree for Naming Retirement Account Beneficiaries after the SECURE Act" which provides a structured analysis, i.e., a decision tree, for determining the answers to these questions. The decision tree article is available below (on the right using the Scribd app).
In some cases you may discover the reason you named a trust as beneficiary of a retirement account is no longer applicable, which permits you to name individuals as beneficiaries instead of a trust (although a trust restatement may still be appropriate in case circumstances change).
But in most cases the solution will be to integrate SECURE Act compliant provisions into your will or revocable living trust by restating it.
This article continues below (on the left using the Scribd app).
The 10-year liquidation rule results in the acceleration of income tax due, possibly causing a beneficiary to be bumped into a higher income tax bracket and receiving less of the funds contained in the retirement account than under the prior law. However, the SECURE Act does provide a few exceptions to the usual rule that are available to surviving spouses, beneficiaries less than 10 years younger than the account owner, minor children, and disabled individuals. But these exceptions only complicate the analysis because your estate planning objectives likely include more than just tax considerations. For example, you might be concerned with protecting a beneficiary’s inheritance from future creditors and ex-spouses or preventing your spouse from disinheriting your children upon the spouse’s remarriage. All these issues should be considered simultaneously when naming beneficiaries of a retirement account.
If your estate plan currently names a trust as primary or secondary beneficiary of a retirement account (e.g., IRA, 401k, TSP), then you should reconsider whether this is still appropriate after the SECURE Act, and if yes, determine what type of trust to use.
As a courtesy, I have written an article, "Decision Tree for Naming Retirement Account Beneficiaries after the SECURE Act" which provides a structured analysis, i.e., a decision tree, for determining the answers to these questions. The decision tree article is available below (on the right using the Scribd app).
In some cases you may discover the reason you named a trust as beneficiary of a retirement account is no longer applicable, which permits you to name individuals as beneficiaries instead of a trust (although a trust restatement may still be appropriate in case circumstances change).
But in most cases the solution will be to integrate SECURE Act compliant provisions into your will or revocable living trust by restating it.
This article continues below (on the left using the Scribd app).
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COMING SOON?
ARIZONA DOMESTIC ASSET PROTECTION TRUSTS
In 2020 the executive council for the Probate and Trust Section of the State Bar of Arizona approved a proposed statute permitting the creation of Arizona qualified spendthrift trusts. This type of self-settled trust is more commonly known as a domestic asset protection trust. The proposed statute (A.R.S. 14-10821) would establish a framework for Arizona residents to protect personal assets from future claims in a manner consistent with and subject to Arizona fraudulent conveyances laws. If enacted, Arizona would become the 20th state to allow self-settled spendthrift trusts.
COMPLIMENTARY
INITIAL ESTATE PLANNING CONSULTATIONS
Tom Bouman provides complimentary initial meetings to prospective estate planning clients. The usual topics include wills, powers of attorney, and living trusts. The purpose of the initial meeting is to become acquainted with each other and discuss your estate planning needs. You will have an opportunity to share your story and share any special concerns. A fee estimate will be provided, but there is no obligation to proceed.
ARIZONA ESTATE ADMINISTRATION ANSWER BOOK
Practical Answers to Common Questions for Any Size Estate in Arizona
The Arizona Estate Administration Answer Book is your best resource for understanding practical issues that commonly arise when responding to the death of an Arizona resident or property owner. Each chapter provides advice and explanations to help you wade through the complex, and often bizarre, legal requirements associated with estate and trust law in Arizona. Written in easy-to-read question and answer format, the Arizona Estate Administration Answer Book covers a comprehensive list of legal and non-legal matters including:
Available for purchase on this website and from Barnes & Noble, Amazon, Kindle App, iBooks, and Nook.
Available to borrow from University of Arizona law school library and Pima County Public Library.
Many free articles about Arizona probate and estate administration are available on this website.
- What if the will was signed in another state?
- Who is entitled to information about the deceased person’s assets?
- When is a probate action required?
- What debts are the survivors responsible for?
- What if the property owner was not an Arizona resident?
- Will the State take the home if the deceased person was on ALTCS?
Available for purchase on this website and from Barnes & Noble, Amazon, Kindle App, iBooks, and Nook.
Available to borrow from University of Arizona law school library and Pima County Public Library.
Many free articles about Arizona probate and estate administration are available on this website.