Retirement accounts can make up a significant part of a family’s savings and inheritance. Changes under the Setting Every Community Up for Retirement Enhancement Act, known as the SECURE Act, changed how many retirement accounts are distributed during life and after death.
The original SECURE Act became law in 2019. Congress later passed SECURE 2.0 in 2022, which made additional changes to retirement savings rules. These laws can affect Required Minimum Distributions (RMDs), inherited IRAs, beneficiary choices, and estate planning decisions.
These SECURE Act FAQs explain several of the rules Maryland residents may want to understand when reviewing their estate plans and retirement accounts.
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The SECURE Act is a federal law that made significant changes to retirement accounts and employer-sponsored retirement plans.
For estate planning purposes, one of its most important changes involved inherited retirement accounts. Before the SECURE Act, many non-spouse beneficiaries could generally take distributions from inherited retirement accounts over their life expectancies. The SECURE Act replaced that approach with a 10-year distribution rule for many beneficiaries.
SECURE 2.0 later made additional changes involving RMD ages, retirement contributions, employer plans, and other retirement rules.
Sinclair Prosser Gasior provides additional information about these changes on its SECURE Act resource page.
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Under current federal rules, many owners of traditional IRAs, SEP IRAs, SIMPLE IRAs, and retirement plan accounts generally begin taking RMDs at age 73.
SECURE 2.0 also provides for the applicable RMD age to increase to 75 for younger individuals beginning in 2033.
Different rules may apply to certain workplace retirement plans, and a person’s birth year can affect when distributions must begin. Roth IRAs and designated Roth accounts generally do not require lifetime RMDs for the original account owner, although beneficiaries remain subject to distribution rules.
The IRS provides current information through its Required Minimum Distribution FAQs.
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Failing to take a required distribution may result in an excise tax on the amount that should have been withdrawn.
SECURE 2.0 reduced the federal excise tax for certain missed RMDs, and a lower rate may apply if the mistake is corrected within the required period. Because deadlines and correction rules matter, retirement account owners should address a missed RMD promptly.
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The SECURE Act requires many beneficiaries who inherit retirement accounts from someone who died after 2019 to fully distribute the inherited account by the end of the tenth year following the account owner’s death.
For example, if an IRA owner dies in 2026 and the 10-year rule applies, the inherited account generally must be fully distributed by December 31, 2036.
Whether the beneficiary must also take annual distributions during those 10 years depends on factors that include the beneficiary’s status and whether the original account owner died before or after the required beginning date for RMDs.
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No. The SECURE Act created a category known as an “eligible designated beneficiary.”
Eligible designated beneficiaries generally include:
- A surviving spouse
- A minor child of the deceased account owner
- A person who is disabled
- A person who is chronically ill
- A person who is no more than 10 years younger than the account owner
These beneficiaries may qualify for different distribution options. A minor child generally becomes subject to the 10-year rule after reaching the applicable age under the federal rules.
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What options does a surviving spouse have?
A surviving spouse generally has more choices than other beneficiaries.
Depending on the circumstances, a spouse may be able to keep the account as an inherited IRA, take distributions under applicable beneficiary rules, or roll the account into the spouse’s own IRA.
The best choice may depend on the surviving spouse’s age, income needs, tax situation, and long-term financial goals. Because the timing of a rollover can affect future RMDs, spouses may want to review their options before moving inherited retirement assets.
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Yes. Beneficiaries of inherited Roth IRAs are generally subject to inherited-account distribution rules even though the original Roth IRA owner was not required to take lifetime RMDs.
Many non-spouse beneficiaries will need to empty an inherited Roth IRA within the applicable 10-year period. The tax treatment of Roth distributions can differ from traditional IRA distributions, so beneficiaries should review the account’s history and applicable rules before taking withdrawals.
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Yes, a trust may be named as the beneficiary of an IRA or other retirement account. However, the SECURE Act made trust planning for retirement benefits more important because the type of trust and its beneficiaries can affect how inherited retirement funds must be distributed.
Some trusts may qualify for treatment based on the individuals who are beneficiaries of the trust, while others may be subject to different distribution rules.
Simply having a trust does not automatically provide favorable retirement-account treatment. The trust language, beneficiary designation, retirement plan terms, and family goals should be reviewed together.
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Naming an estate can produce different results from naming an individual or a qualifying trust.
The SECURE Act’s beneficiary rules generally distinguish between individual designated beneficiaries and beneficiaries that are not individuals. Depending on when the account owner dies, an estate may face a five-year distribution rule or another distribution schedule.
For this reason, beneficiary forms should be coordinated with the overall estate plan instead of being completed without considering the tax and estate planning effects.
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Retirement accounts generally pass according to the beneficiary designation on file with the retirement account custodian or plan administrator rather than according to a will.
For example, naming one child on an IRA beneficiary form and naming all children equally in a will does not necessarily divide the IRA among all of the children.
Beneficiary designations should be reviewed after major life events such as marriage, divorce, death, birth of a child, or changes to an estate plan.
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A review may be helpful if a substantial portion of your estate is held in IRAs, 401(k)s, or other retirement accounts.
Older estate plans may have been created when beneficiaries could expect to stretch inherited IRA distributions over much longer periods. The SECURE Act changed that assumption for many families.
A review can help determine whether your beneficiary designations, trust provisions, and distribution instructions still match your goals.
These SECURE Act FAQs cover common questions, but retirement account rules depend on the type of account, the age of the owner, the beneficiary relationship, and the timing of the account owner’s death. Coordinating retirement accounts with an estate plan can help reduce uncertainty and ensure beneficiary choices reflect current law.
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At Sinclair Prosser Gasior, our estate planning attorneys in Annapolis, Maryland, help families create comprehensive plans that reflect their wishes and protect their legacies. Whether you’re preparing a will, trust, or power of attorney, our team provides trusted guidance every step of the way.
Contact us today at (410) 573-4818 or visit our website to schedule a consultation and plan for peace of mind.
This resource is provided for educational purposes only and should not be considered legal or tax advice. Retirement account and tax rules can change, and their application depends on individual circumstances. Reading this page does not create an attorney-client relationship.
