Chicago residents who have executed an estate plan or are planning to do so will want to keep a close eye on the spending bill currently making its way through Congress. The bill includes what has been called the “SECURE Act” and it will have a major impact on existing estate plans, as well as provide new grounds on how estate plans are shaped in the future.

First, the bill will change how Individual Retirement Accounts (IRAs) can be passed on in an estate plan. It eliminates the “stretch IRA” that previously allowed for the distribution of IRAs to stretch over the heir’s lifetime through minimum yearly pay-outs. This allowed both for the growth of principal on the account, as well as having each yearly distribution taxed. However, under the Act, IRAs can only be distributed for up to 10 years, after which there will be a single tax bill on all distributions. Heirs will then need to reinvest any funds that remained in the IRA after the 10 years are up.

Another element of the Act that will have a major impact on estate planning is that the age at which minimum distributions must begin will be raised from 70.5 years old to 72 years old. Thus, those who reach age 70.5 before the Act takes effect in 2020 must start taking their minimum distributions at that age, rather than at age 72 as provided under the Act.

Those whose current estate plans include IRAs will want to carefully examine their plan to determine how the Act will affect it and whether any changes to be made. Keep in mind that once the creator of the estate plan passes away, it can no longer be modified. Therefore, those who have an estate plan or who plan on executing one in the nearby future will want to make sure their plans will still meet their needs once the 2020 spending bill passes.