Do You Fully Understand how the SECURE Act 2.0 Impacts Your Estate Plan and Why it May Require Reviewing & Updating your Plan?

A husband and wife meeting with an attorney for an estate plan review

The SECURE Act 2.0 brings significant changes to retirement and estate planning that could affect how you pass on your assets to your loved ones. Many people overlook the need to update their estate plans regularly, assuming that a plan created just a few years ago still fits their current situation. This can lead to unintended consequences for you and your beneficiaries. Scheduling a trust review early in the year, especially with experienced professionals like Castro Law, can help you navigate these changes and protect your legacy.

What the SECURE Act 2.0 Means for Your Estate Plan

The SECURE Act 2.0 builds on the original SECURE Act passed in 2019, introducing new rules that impact retirement accounts, required minimum distributions (RMDs), and beneficiary designations. These changes affect how and when you must withdraw funds from retirement accounts, which in turn influences your estate planning strategies.

For example, the new law raises the age for RMDs from 72 to 73 starting in 2023, and eventually to 75 by 2033. This means you can keep your retirement savings growing tax-deferred for a longer period. However, it also changes the timeline for beneficiaries who inherit these accounts. The 10-year distribution rule for most non-spouse beneficiaries remains, but there are exceptions and new provisions that may apply depending on your situation.

Failing to update your estate plan to reflect these changes can cause confusion and tax inefficiencies for your heirs. For instance, if your trust or beneficiary designations do not align with the new rules, your beneficiaries might face accelerated tax burdens or lose access to certain protections.

Risks of Not Updating Your Estate Plan Regularly

Estate plans are not “set it and forget it” documents. Life changes, tax laws evolve, and financial situations shift. Even a plan created just a couple of years ago may no longer serve your best interests. Here are some risks of not updating your estate plan:

• Outdated beneficiary designations: Retirement accounts and life insurance policies often pass outside of wills or trusts. If these designations are old, they might not reflect your current wishes or family situation.

• Tax consequences: Changes in tax laws, like those in SECURE Act 2.0, can affect how much your heirs owe in taxes. Without updates, your estate might face unnecessary tax liabilities.

• Trust provisions may be obsolete: Trust language might not account for new laws or your current goals, potentially causing delays or disputes.

• Missed opportunities for asset protection: New strategies or legal tools may be available that were not when your plan was created.

• Family dynamics changes: Marriages, divorces, births, or deaths require adjustments to ensure your estate plan reflects your current relationships.

  
  

For example, a client who created a trust in 2020 might not have accounted for the SECURE Act’s new RMD ages or the 10-year payout rule for inherited IRAs. Without a review, their beneficiaries could face unexpected tax bills or lose access to funds sooner than intended.

Why January Is the Best Time to Schedule a Trust Review with Castro Law

Starting the year with a trust review is a smart move. January offers a fresh start to assess your estate plan in light of recent legal changes and personal developments. Castro Law specializes in trust and estate planning and can help you:

• Understand how SECURE Act 2.0 affects your plan: They will explain the new rules and how to adjust your documents accordingly.

• Review beneficiary designations and trust language: Ensuring everything aligns with your current wishes and the law.

• Identify tax-saving opportunities: Helping you minimize the tax burden on your estate and heirs.

• Update your plan for life changes: Incorporating any changes in family or financial status.

• Provide peace of mind: Knowing your estate plan is current and effective.

  
  

Scheduling early in the year also gives you time to make any necessary changes before tax season or other deadlines.

Practical Steps to Take Now

To protect your estate and beneficiaries, consider these actions:

• Gather all your estate planning documents, including wills, trusts, and beneficiary forms.

• List any major life changes since your last review.

• Note any questions or concerns about the SECURE Act 2.0 or your current plan.

• Contact Castro Law to schedule a trust review appointment.

• Prepare to discuss your goals and any new assets or accounts.