SECURE Act: Death of the Stretch (mostly)

Posted by Gregory Singleton | Jan 15, 2020 | 0 Comments

In December 2019, Congress passed the SECURE Act, which dramatically changed the world of estate planning. Plan holders should, across the board, review their estate plan with their attorney. If they are affected they will need to come up with a new strategy for their plan.

The S-t-r-e-t-c-h

SECURE ACT stands for “Setting Every Community Up for Retirement Enhancement Act”. The Act altered the allowable scope of the so-called “stretch IRA”. Before the SECURE Act, a trust could be named as the beneficiary to an IRA. Then, after the decedent's death, their heir or heirs would be beneficiaries to the trust. Rather than receiving the lump sum all at once (and incurring a substantial income tax), the trust could parcel out the trust assets over a long period of time, allowing the beneficiary to pay less in income taxes overall.

The SECURE Act changes this. It no longer allows all trusts to pay out their assets over an indefinite period. Instead, for most trusts, it requires that all assets be distributed from the trust within ten years. Now, rather than smaller distributions over the beneficiary's lifetime, larger amounts must be distributed. This includes a possible lump sum at the end of ten years. This higher distribution will inevitably create a higher income tax that before the SECURE Act, could be avoided. This change is expected to collect nearly $16 billion over the next decade.

For example

A single father left $1 million in a trust to his 24-year old daughter. Before the SECURE Act, the trust could pay out distributions to the daughter, for example, equal amounts of $25,000 for forty years, including any revenues from investing the funds. With the passing of the SECURE Act, the trust would be required to distribute all assets within ten years. This could, for example, $100,000 each year (plus revenue), or $25,000 every year for nine years, and a whopping $775,000 in year ten, skyrocketing the amount of income tax payable from the estate.

Is the Stretch dead dead?

While things may look grim, the anti-stretch provisions are not without exception. For example, spousal beneficiaries are not limited to the ten years. Neither are beneficiaries that are not more than 10 years younger than the decedent. There are further carveouts for disabled beneficiaries and chronically ill beneficiaries, as defined by IRC §§ 72(m)(7) and 7702B(c)(2), respectively. Finally, the ten-year clock does not start for minor children of the decedent until the child reaches the age of majority (18 in Minnesota).

Estate planners are already at work trying to find ways to avoid the tax burden. But at the very least, if you have an estate plan, you need to speak with a professional to find out if your current plan complies with the new Act.


The SECURE Act has added a whole new level of complexities to estate planning. It took away some popular strategies and is going to force people to review their current plan to make sure it is compliant with the law. If you have questions about the SECURE Act or need a plan review, please contact Signature Law for a free consultation.

About the Author

Gregory Singleton

Trusted Legal Advisor Gregory Singleton is a skilled attorney, experienced in both litigation and transactional work. He has tried multi-million-dollar cases and has negotiated multi-billion dollar contracts. With Signature Law, his goal is to make the law accessible to you, your families, and y...


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