SECURE Act 2.0: Estate and Trust Planning Guide for Retirement Accounts

The SECURE Act of 2019 eliminated the so‑called “lifetime stretch” strategy that allowed non‑spouse beneficiaries to withdraw from inherited IRAs and 401(k)s over their life expectancies. Under the original law, most heirs must now empty inherited accounts within ten years. For trusts set up to receive retirement assets, that change can be a minefield. Conduit trusts—which require the trustee to pass distributions immediately to beneficiaries—may force beneficiaries to receive the entire account within the ten‑year window. Estate‑planning attorneys increasingly recommend converting conduit trusts into accumulation trusts, which let the trustee retain distributions inside the trust and distribute them at their discretion. That flexibility preserves creditor protection, shields spendthrift beneficiaries and may reduce income‑tax spikes.

How SECURE Act 2.0 alters the timeline

The sequel, SECURE Act 2.0, signed in late 2022, extends required minimum distributions (RMDs) for account owners and phases in other changes through 2033. Beginning in 2023, the age at which owners must start taking RMDs rose from 72 to 73 and will increase again to 75 in 2033. The longer deferral period means IRAs and 401(k)s could grow larger by the time they pass to heirs, who will then have to withdraw the funds in just ten years. This mismatch—longer accumulation but compressed distribution—amplifies the importance of reviewing trust provisions now. Larger inherited accounts could push beneficiaries into higher tax brackets or trigger the 3.8 % net‑investment‑income tax.

SECURE 2.0 also increases catch‑up contribution limits for workers aged 60–63 starting in 2025 and indexes certain IRA contribution thresholds for inflation. These tweaks allow older workers to build bigger retirement balances but further underscore the need to revisit beneficiary designations and coordinate retirement strategies with estate planning.

Leveraging Roth conversions and other strategies

Roth IRA conversions become more attractive under the new law because Roth accounts are not subject to lifetime RMDs. By converting part of a traditional IRA into a Roth before retirement, taxpayers pay income tax at today’s rates and can then leave tax‑free assets to heirs. Distributions from inherited Roth IRAs still must occur within ten years, but they are generally tax free, providing flexibility and potentially lowering overall taxes. Individuals contemplating large Roth conversions should weigh the up‑front tax cost against future tax rates and the size of their estates.

Other techniques include staggering beneficiary designations to spread distributions among multiple people, naming charities for tax‑efficient giving, or using a charitable remainder trust (CRT) to provide heirs with income for life or a term before the remainder passes to charity.

Practical steps for trustees and beneficiaries

1. Review trust terms and beneficiary designations.  Verify whether retirement assets are payable to a conduit trust and consider amending the trust to an accumulation structure so trustees can control distributions.

2. Update estate plans regularly.  SECURE 2.0’s staggered implementation means rules will change again in 2025 and 2033. Clients should revisit their estate documents every few years and whenever tax laws shift.

3. Consider Roth conversions.  Converting some traditional IRA assets to Roth accounts can reduce the impact of the ten‑year rule on beneficiaries and balance income taxation.

4. Coordinate with tax and financial professionals.  The interplay between RMD ages, tax brackets, and the ten‑year rule is complex. Professional guidance can help structure trusts and beneficiary designations to align with family goals and tax efficiency.

Final thoughts

The SECURE Act and its 2.0 sequel have transformed retirement‑account planning. Larger tax‑deferred balances, compressed withdrawal windows, and ever‑changing regulations require trustees and beneficiaries to act proactively. By revisiting trust provisions, considering Roth conversions, and consulting experienced advisors, families can turn legislative upheaval into opportunity and ensure inherited retirement accounts support—not undermine—their long‑term wealth‑transfer goals.