Colorado Estate Planning in Light of the SECURE Act

In an effort to provide Americans with access to retirement savings, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The SECURE Act created profound retirement and tax reforms resulting in myriad implications for American workers. The changes should prompt individuals to reevaluate their Colorado estate plan documents to ensure a happy and secure retirement.

The SECURE Act requires Colorado certain employers to offer their employees a retirement savings plan or enroll their qualifying workers in a state-sponsored retirement account. The Act applies to most employers besides small private and nonprofit entities. Significant changes include 401(k)s, IRAs, and 529 college savings accounts. The ACT offers small Colorado business owners a tax credit for starting a workplace retirement plan. Further, new parents receive a benefit in the form of a penalty-free $5,000 withdrawal from a 401(k) or IRA following the birth or adoption of a child.

One of the most significant changes involves the elimination of the “stretch” option for retirement accounts. Under the Act, the majority of non-spouse beneficiaries must withdraw the balance of any inherited retirement accounts within ten years. Beneficiaries must adjust their withdrawal plans to avoid a drastic increase in their tax bills. Before the change, beneficiaries of inherited retirement accounts could opt to take distributions over their lifetime. The change may result in a change of a beneficiaries tax bracket, thus receiving more minor of the funds in the account than initially planned.

The new plan excludes certain groups of individuals from the 10-year-rule. Current beneficiaries and spousal beneficiaries can continue to use the “stretch provision.” Further, the 10-year-rule does not apply for minors until the minor reaches 18-years-old. Finally, those who meet the governmental definitions for “disabled” or “chronically ill” are not subject to the rule.

In light of the new model, individuals should consult with a Colorado attorney to reevaluate their estate plans. Post-SECURE inherited retirement accounts will not provide beneficiaries with the same benefits. As such, individuals should consider alternative options to transfer wealth along with tax benefits. Some options that individuals should consider are Revocable Living Trusts (RLT) or Standalone Retirement Trusts (SRT), Charitable Remainder Trusts (CRT), Irrevocable Life Insurance Trusts (ILIT), and Multi-Generational Spray Trusts. A Colorado estate planning attorney can assist individuals in creating or modifying an existing estate plan to protect their assets for generations to come.

Modifying Existing Colorado Estate Plans

Under the new tax paradigm, it is advisable that individuals contact the Colorado estate planning attorneys at the Braverman Law Group. The attorneys at our law firm can provide Coloradans with critical assistance in developing effective asset protection in light of the recent tax changes. Our attorneys handle all aspects of Colorado estate plans, including special needs planning, gun trusts, and asset protection. We handle drafting and creating documents and representing clients during probate proceedings in court. The experienced attorneys at our office can ensure that you feel secure in your plans for the future. Contact our office at 303-800-1588 to schedule a free initial consultation with an attorney on our team.