What Happened to My Retirement?

By Attorney James A. Spella, Schloemer Law Firm, S.C.

In a ‘slight of hand’, much like a parent telling his errant child – “I’m doing this for your own good” – Congress passed the ‘Setting Up Community for Retirement Enhancement Act of 2019’ (SECURE Act). The title is an oxymoron as good as ‘jumbo shrimp’.

Though purporting to enhance retirement planning and wealth accumulation, the SECURE Act’s true intent was to tax your retirement accounts sooner, and more likely, at higher tax rates than otherwise will have occurred. (Specific details and guidance as to the SECURE Act are included in a previously published blog by our firm for your review.)

The purpose of this message is to assist you in determining if you need to address beneficiary designations for your qualified retirement accounts.  “Qualified” accounts means accounts that you have not paid income tax on, but will do so on withdrawal.

If you can answer ‘yes’ to one or more of the following questions, you should have your retirement plan beneficiary designations reviewed to ensure that the beneficiary designations do not unwittingly create additional income taxes, which will reduce the value and benefit of your retirement for yourself, your spouse, or your heirs.

  1. Do you have a trust named as a beneficiary on a retirement account?
  2. Is it possible that a child of yours will be a beneficiary of your retirement account?
  3. Are you a surviving spouse with a spousal roll-over account?
  4. Have you inherited a retirement account?
  5. Is your spouse a beneficiary of your retirement account?
  6. Are minor children beneficiaries of your retirement account?
  7. Is it possible that you would want a beneficiary of your retirement account, other than your spouse, to have the account held in trust to an age greater than 28?
  8. Do you have charitable beneficiaries in your estate distribution plan?
  9. Are you in a second marriage, and desire to provide for your current spouse and also your children?
  10. Does your current estate plan include a trust for your spouse?
  11. Does your current estate plan include a trust for your children?
  12. Do any of your children have ‘special need’ concerns?
  13. If you have a trust for your spouse, or your other heirs, does the Trustee given broad discretion as to distributions?
  14. Are you considering a Roth IRA conversion, or a Backdoor Roth IRA conversion?
  15. Do you have a beneficiary who is ‘disabled’ or ‘chronically ill’?
  16. Were your beneficiary designations made prior to January 1, 2020?
  17. Do you have any retirement accounts?

This last question is the most important.  If you answer ‘yes’ to question 17, and do not review your personal planning/distribution objectives in light of the SECURE Act, you will not have afforded yourself the ability to maximize retirement account benefits for your beneficiaries.

While Congress calls the SECURE Act an ‘enhancement’, failure to properly plan can have devastating tax consequences on your spouse or heirs.

The attorneys of the Schloemer Law Firm, S.C.  would welcome the opportunity to assist you in putting your plan in place so as to maximize the benefit to be afforded to your spouse and/or beneficiaries. Please contact us at 262-334-3471 or [email protected] to set up an appointment to meet with one of our experienced Estate Planning Attorneys.

Originally published: March 7, 2020.

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Disclaimer: The information contained in this post is for general informational purposes only and is not legal advice. Due to the rapidly changing nature of law, Schloemer Law Firm makes no warranty or guarantee concerning the accuracy or completeness of this content. You should consult with an attorney to review the current status of the law and how it applies to your unique circumstances before deciding to take—or refrain from taking—any action.  If you need legal guidance, please contact us at 262-334-3471 or [email protected]