How New York’s SECURE Act 2.0 Changes Are Reshaping Estate Planning Strategies in 2024

The landscape of estate planning has undergone significant transformation with the implementation of the SECURE Act 2.0, and the IRS released the final regulations for SECURE 2.0 on July 19, 2024. For New York families and individuals, these changes demand immediate attention to their estate planning strategies, particularly when it comes to retirement accounts and inherited IRAs.

Understanding the SECURE Act 2.0 Impact

On December 29, 2022, the SECURE Act 2.0 (SECURE 2.0) was signed into law as part of the Consolidated Appropriations Act, 23, with SECURE 2.0 intended to build upon the original SECURE Act. SECURE 2.0 brings major changes to the administration of IRAs, both during the lifetime of the IRA account holder and after the account holder’s death.

The most significant change affecting estate planning involves the 10-year distribution rule for inherited retirement accounts. SECURE Act 2.0 clarified that for inherited accounts from a decedent who died after their required beginning date (when they were required to start taking minimum distributions), beneficiaries must take annual required minimum distributions (RMDs) during that 10-year window, rather than waiting until the end of the period to withdraw the full amount.

Key Changes Taking Effect in 2025

As of January 1, 2025, SECURE Act 2.0 steps onto the stage with new rules and stricter timelines, especially for those navigating the complex terrain of inherited IRAs and trust-based beneficiaries. The penalty structure has also been modified: Starting January 1, 2025, failure to take an RMD from an inherited IRA will result in a penalty of 25 percent of the RMD amount, reduced to 10 percent if timely corrected.

For New York residents, these changes create both challenges and opportunities. With respect to RMDs for years prior to January 1, 2025, IRS Notice 2024-35 provides that the IRS will not impose penalties for failure to take an RMD for years one through nine from an inherited IRA that is otherwise subject to the 10-year rule. However, this relief period is ending, making 2024 a critical year for estate planning adjustments.

New Opportunities for Estate Planning

The SECURE Act 2.0 isn’t all restrictive – it also creates new planning opportunities. Beginning in 2024, the beneficiary of a 529 Plan can roll funds (capped at $35,000.00) into a Roth IRA. This provision allows families to repurpose unused education savings for retirement planning without penalty.

Additionally, a new provision under SECURE Act 2.0 eliminates the RMD requirement for Roth 401(k) accounts starting in 2024, providing greater flexibility for retirement and estate planning strategies.

Trust Planning Considerations

If a trust is named as your IRA beneficiary, now is a good time to review your estate plan. Many trusts were drafted before the SECURE Act, assuming lifetime “stretch” RMDs. With that option gone, your plan may unintentionally accelerate payouts and taxes. For example, if you wanted to protect heirs by spreading distributions across decades, the new rules could unintentionally accelerate both payouts and taxes.

In terms of required documentation for plan administrators, SECURE 2.0 requires the trustee of a trust designated as the beneficiary of an IRA to provide the plan administrator either (i) a copy of the trust instrument, or (ii) a list of all beneficiaries of the trust (describing how and when a beneficiary is entitled to a distribution).

Why Professional Guidance is Essential

Given the complexity of these changes, working with an experienced Estate Planning Attorney Centereach has become more crucial than ever. The regulations are intricate, and mistakes can be costly. Final rules are expected in 2025. That’s when we expect final regulations and rules on how the withdrawals will work.

Fratello Law, a community-based law firm with offices in Nassau and Suffolk Counties, specializes in helping New York families navigate these complex estate planning challenges. Planning peace of mind with experience and compassion. Every client is unique and we take the time to understand our clients’ individual needs. At Fratello Law, we love building lasting relationships with clients that span generations!

Immediate Action Items for 2024

New York residents should take several immediate steps to align their estate plans with SECURE Act 2.0 requirements:

• Review trust documents with your estate planning attorney
• Confirm if the original IRA owner had started RMDs. This determines whether annual RMDs are now required
• Identify your beneficiary classification – spouse, eligible designated beneficiary, non-eligible beneficiary, or trust
• Consider the new 529-to-Roth IRA rollover opportunities for education planning
• Evaluate whether trust beneficiaries should be changed to direct beneficiaries

Looking Ahead

With the SECURE Act 2.0 in effect, RMD rules for inherited IRAs and trusts are stricter than ever. Both account owners and beneficiaries should review estate and tax plans now. Proactive steps today can help protect your inheritance tomorrow.

The SECURE Act 2.0 represents a fundamental shift in how retirement accounts integrate with estate planning. For New York families, understanding these changes and adjusting estate plans accordingly isn’t just advisable – it’s essential for preserving wealth and minimizing tax burdens for future generations. The window for penalty-free adjustments is closing as we approach 2025, making immediate professional consultation a wise investment in your family’s financial future.