Fort Worth IRA Trust Attorney

An IRA trust is designed to minimize the tax consequences for beneficiaries of a retirement plan. With the federal SECURE Act now in place, however, estate planners need to be aware of the new rules governing retirement trusts. At the Law Office of Carey Thompson, we provide comprehensive estate plans to individuals and families in the Dallas-Fort Worth area and throughout Texas.

If you hold an Individual Retirement Account (IRA), have established an IRA Trust, or are considering putting a retirement trust in place, you need the informed representation we provide. When you consult with us, we will work to help you ensure that your retirement goals and estate planning objectives are on the right track.

What is the Purpose of an IRA Trust?

IRA trusts have customarily been used to protect the funds in retirement accounts when the trustmaker passes away. Generally, there are two types of IRA trusts:

  • Accumulation trusts in which funds are distributed at the discretion of the trustee
  • Conduit trusts in which beneficiaries receive distributions as payments are received by the trust

In both types of trusts, beneficiaries cannot withdraw funds at will. In addition, funds intended for the beneficiary are protected against creditor claims. The primary advantage of an accumulation trust, such as a stand-alone retirement trust, is that the beneficiary can withdraw or “stretch” the funds during his or her life expectancy. Under the SECURE Act, however, this option is no longer available.

What is the SECURE Act?

The SECURE Act (Setting Every Community Up for Retirement Act) was passed by Congress as part of a budget measure in 2019. The SECURE Act went into effect on January 1, 2020. In particular, this law will impact IRAs, 401(k)s, and defined pension benefit plans in a number of ways. First, it repealed the maximum age, which was previously 70 ½ for IRA contributions. In addition, the SECURE Act also increased the required minimum distribution age (RMD) for retirement accounts from 70 ½ to 72.

Basically, the SECURE Act recognizes that people are living longer today and many are working past the customary retirement age. Although RMDs will now start at age 72 for individuals who turn 70 ½ this year, those who have already turned 70 ½ and are taking these distributions can continue to do so. In short, the rules for RMDs for traditional IRA holders have been aligned with the rules governing distributions for Roth IRAs and 401(k)s.

Finally, certain part-time employees are now permitted to participate in 401(k) plans. Previously, employees who worked less than 1,000 hours per year were ineligible for these employer-sponsored retirement plans. The SECURE Act remedies this by requiring employers to offer 401(k) plans to employees who (1) work more than 1,000 hours per year or (2) 500 hours over three consecutive years.

If you have concerns about how the SECURE Act will impact your IRA, 401(k) or retirement trust, Carey Thompson can help. He regularly advises clients on retirement and estate planning and will work closely with you to help you achieve your financial objectives.

How The SECURE ACT Impacts IRA Trusts

If you have an IRA trust in place or intend to leave an IRA to your beneficiaries, there are new rules governing distributions to consider. In the past, beneficiaries of IRA trusts and 401(k)s could “stretch” taxes and distributions over their life expectancy, which provided them with a reliable source of income.

Now, beneficiaries of IRA trusts and 401(k)s are required to withdraw funds from those plans within 10 years of the original account holder’s death, and this will have serious tax implications. However, there are exemptions for the following beneficiaries:

  • A surviving spouse
  • A minor child
  • A disabled beneficiary
  • Beneficiaries less than 10 years younger than the original account holder

In addition, beneficiaries of an IRA or 401(k) who inherited a retirement account from an original owner who passed away prior to January 1, 2020 can continue to stretch their distributions.

Contact Our Experienced Texas IRA Trust Attorneys

Because the new rules for IRAs, 401(ks) and inherited retirement plans under the SECURE Act are complicated, it is crucial to revisit your retirement and estate planning goals with the guidance of a capable attorney. While the SECURE Act is intended to make retirement planning easier, having a well-conceived estate plan requires trustworthy advice. At the Law Office of Carey Thompson, our legal team is committed to helping you fulfill your retirement and estate planning goals. Please contact our office today to set up a free consultation.