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How to account for the SECURE Act

In 2019, the federal estate tax exemption was $11.4 million. In 2018, there were only 1,900 families that were subject to this tax, which means that it has become less of an issue for most people who are creating their estate plans. Typically, Nevada residents and others are more concerned about limiting capital gains taxes or otherwise making a plan as easy to carry out as possible. However, the SECURE Act may require individuals and families to adjust their current plans.

For example, it may be best to name a spouse as a primary beneficiary on an IRA. This is because beneficiaries who aren't a person's spouse will now have to use the funds in an inherited IRA within 10 years. By allowing the spouse to retain a portion of the account balance, a child or other beneficiary may pay less in taxes.

Those who have a traditional IRA may want to consider converting to a Roth IRA. Doing so allows a person to make qualified distributions tax-free, and it also allows an account balance to be transferred to a beneficiary without incurring any taxes. Finally, if a revocable trust is named the beneficiary of an IRA, it may be a good idea to eliminate the trust. At a minimum, the trust should be updated to take the SECURE Act into account.

Generally speaking, trust planning may be ideal for any person who is over the age of 18. However, it may be even more important to review a trust or other estate plan components after new legislation has passed and taken effect. Doing so may make it possible to determine if a trust or other document is still necessary to meet a person's goals. An attorney may help a client go through the estate plan review process.

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