DOUGLAS STIRLING Financial Advisor Stirling Wealth Management Forbes BEST-IN-STATE WEALTH ADVISORS TRUSTEED IRAS NEED TO BE REVIEWED UNDER POST- SECURE ACT RULES Those considering using a trusteed IRA to address larger wealth transfer goals are encouraged to take a fresh look at their plans following the updated distribution rules of the SECURE Act and SECURE ACT 2.0! While in many cases, retirement plans developed before the Setting Every Community Up for Retirement Enhancement Act of 2019 (bet- ter known as the SECURE Act) continue to work, others require tweaking. In particular, the elimination of the stretch IRA for most non- spouse beneficiaries significantly changes the tax aspects that apply to younger beneficiaries. The greatest urgency is for those IRA owners who are using a trust which includes pre-SECURE rules that force beneficiaries to stretch distributions over their life expectancy. Under the updated rules, a beneficiary might receive no distributions for 10 years, and then wind up with a large distribution (and tax bill) in the final year. Because trust planning is ordinarily done for the largest IRAS, confronting this problem is especially critical for advisors and their clients. There are exceptions: Spouses still enjoy the same advantage under post-SECURE stretch IRA rules, as well as beneficiaries who are less than 10 years younger than the account owner, and beneficiaries who are disabled or chronically ill. TO NON-SPOUSE BENEFICIARIES The updated rules force non-spouse beneficiaries to empty the IRA no later than 10 years after the death of the account owner. The income tax owed by the IRA beneficiary will be at his or her marginal rate when distributions are made. In some circumstances, beneficiaries may choose to wait with the expectation that their own rates will be less in the future. Other beneficiaries are likely to be in a high bracket throughout, and the effect of the post-SECURE distribution rules will push them into an even higher bracket. The end result will be a greater loss of family wealth to taxes as it moves to the next generation. CONSIDERING ACCUMULATION TRUSTS Although trusteed IRAS and trusts generally offer the account owner greater control, the post-SECURE rules may alter trust planning. In general, for a pre-SECURE trust to have qualified for the stretch, the trust must have been drafted as a "see-through" trust, either conduit or accumulation. Conduit trusts are designed to force out all IRA distributions to the trust beneficiaries. Accumulation trusts, on the other hand, provide the trustee with discretion whether to pay out or retain IRA distributions within the trust. Therefore, the trustee has the ability to spread some of the tax burden to the trust income beneficiaries, as opposed to accumulating all income within the trust. Consequently, IRAs payable to a trust should aim to qualify as an accumulation trust, allowing for more tax-efficient distributions. SECURE ACT IMPACT SHOULD NOT BE IGNORED Fortunately, as long as the account owner still has testamentary capacity, changes to the beneficiary structure is possible. Some account owners may determine the updated rules are sufficient for their estate plan; others may want to consider a fresh approach. However, no account owner should ignore the potential im- pact of the SECURE Act. Several approaches should be discussed: 1. Leave everything as is-Many plans created under the pre-SECURE rules will continue to work, others may not, but are preferable to the more drastic alterna- tives discussed below. 2. Roth conversions--Although a conversion from IRA to a Roth IRA can be costly, the tax-free long-term growth can be a significant reward for paying the tax upfront, especially if this can be done at a lower rate. 3. Life Insurance-Utilize the after-tax IRA distribution to fund premiums on life insurance. The proceeds received by the beneficiaries are generally free of all income and inheritance taxes, so it's a tax-efficient way to transfer wealth to the younger generation. 4. CRTS-Charitable remainder trusts offer attractive benefits for account owners with philanthropic wishes. A fund is created and pays an annuity income stream to a beneficiary followed by a distribution of the trust remainder to a charitable organization. The tax consequences are determined when the trust is created. This means that there is no recalculation made if the beneficiary "beats" the life expectancy table. Authored by Jay Guyer of Janney Montgomery Scott LLC 'Retirement Plan and IRA Required Minimum Distributions FAQs, Internal Revenue Service (irs.gov) Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. Janney Stirling Wealth Management at Janney Montgomery Scott LLC 2200 Georgetowne Drive, Suite 400, Sewickley, PA 15143 www.stirlingwealthmanagement.com | 724.934.2953 JANNEY MONTGOMERY SCOTT LLC MEMBER: NYSE. FINRA SIPC REF 1363250-0224 STIRLING WEALTH MANAGEMENT at Janney Montgomery Scott LLC Douglas W. Stirling | EVP/Wealth Management, Financial Advisor W. Wallace Danforth | VP/Wealth Management, Financial Advisor Joe Kennedy I Financial Advisor Janney Montgomery Scott LLC is a member of the New York Stock Exchange, Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. For more information about Janney, please see Janney's Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest. 321561 DOUGLAS STIRLING Financial Advisor Stirling Wealth Management Forbes BEST - IN - STATE WEALTH ADVISORS TRUSTEED IRAS NEED TO BE REVIEWED UNDER POST SECURE ACT RULES Those considering using a trusteed IRA to address larger wealth transfer goals are encouraged to take a fresh look at their plans following the updated distribution rules of the SECURE Act and SECURE ACT 2.0 ! While in many cases , retirement plans developed before the Setting Every Community Up for Retirement Enhancement Act of 2019 ( bet ter known as the SECURE Act ) continue to work , others require tweaking . In particular , the elimination of the stretch IRA for most non spouse beneficiaries significantly changes the tax aspects that apply to younger beneficiaries . The greatest urgency is for those IRA owners who are using a trust which includes pre - SECURE rules that force beneficiaries to stretch distributions over their life expectancy . Under the updated rules , a beneficiary might receive no distributions for 10 years , and then wind up with a large distribution ( and tax bill ) in the final year . Because trust planning is ordinarily done for the largest IRAS , confronting this problem is especially critical for advisors and their clients . There are exceptions : Spouses still enjoy the same advantage under post - SECURE stretch IRA rules , as well as beneficiaries who are less than 10 years younger than the account owner , and beneficiaries who are disabled or chronically ill . TO NON - SPOUSE BENEFICIARIES The updated rules force non - spouse beneficiaries to empty the IRA no later than 10 years after the death of the account owner . The income tax owed by the IRA beneficiary will be at his or her marginal rate when distributions are made . In some circumstances , beneficiaries may choose to wait with the expectation that their own rates will be less in the future . Other beneficiaries are likely to be in a high bracket throughout , and the effect of the post - SECURE distribution rules will push them into an even higher bracket . The end result will be a greater loss of family wealth to taxes as it moves to the next generation . CONSIDERING ACCUMULATION TRUSTS Although trusteed IRAS and trusts generally offer the account owner greater control , the post - SECURE rules may alter trust planning . In general , for a pre - SECURE trust to have qualified for the stretch , the trust must have been drafted as a " see - through " trust , either conduit or accumulation . Conduit trusts are designed to force out all IRA distributions to the trust beneficiaries . Accumulation trusts , on the other hand , provide the trustee with discretion whether to pay out or retain IRA distributions within the trust . Therefore , the trustee has the ability to spread some of the tax burden to the trust income beneficiaries , as opposed to accumulating all income within the trust . Consequently , IRAs payable to a trust should aim to qualify as an accumulation trust , allowing for more tax - efficient distributions . SECURE ACT IMPACT SHOULD NOT BE IGNORED Fortunately , as long as the account owner still has testamentary capacity , changes to the beneficiary structure is possible . Some account owners may determine the updated rules are sufficient for their estate plan ; others may want to consider a fresh approach . However , no account owner should ignore the potential im pact of the SECURE Act . Several approaches should be discussed : 1. Leave everything as is - Many plans created under the pre - SECURE rules will continue to work , others may not , but are preferable to the more drastic alterna tives discussed below . 2. Roth conversions -- Although a conversion from IRA to a Roth IRA can be costly , the tax - free long - term growth can be a significant reward for paying the tax upfront , especially if this can be done at a lower rate . 3. Life Insurance - Utilize the after - tax IRA distribution to fund premiums on life insurance . The proceeds received by the beneficiaries are generally free of all income and inheritance taxes , so it's a tax - efficient way to transfer wealth to the younger generation . 4. CRTS - Charitable remainder trusts offer attractive benefits for account owners with philanthropic wishes . A fund is created and pays an annuity income stream to a beneficiary followed by a distribution of the trust remainder to a charitable organization . The tax consequences are determined when the trust is created . This means that there is no recalculation made if the beneficiary " beats " the life expectancy table . Authored by Jay Guyer of Janney Montgomery Scott LLC ' Retirement Plan and IRA Required Minimum Distributions FAQs , Internal Revenue Service ( irs.gov ) Janney Montgomery Scott LLC , its affiliates , and its employees are not in the business of providing tax , regulatory , accounting , or legal advice . These materials and any tax - related statements are not intended or written to be used , and cannot be used or relied upon , by any taxpayer for the purpose of avoiding tax penalties . Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor . Janney Stirling Wealth Management at Janney Montgomery Scott LLC 2200 Georgetowne Drive , Suite 400 , Sewickley , PA 15143 www.stirlingwealthmanagement.com | 724.934.2953 JANNEY MONTGOMERY SCOTT LLC MEMBER : NYSE . FINRA SIPC REF 1363250-0224 STIRLING WEALTH MANAGEMENT at Janney Montgomery Scott LLC Douglas W. Stirling | EVP / Wealth Management , Financial Advisor W. Wallace Danforth | VP / Wealth Management , Financial Advisor Joe Kennedy I Financial Advisor Janney Montgomery Scott LLC is a member of the New York Stock Exchange , Financial Industry Regulatory Authority and the Securities Investor Protection Corporation . For more information about Janney , please see Janney's Relationship Summary ( Form CRS ) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest . 321561