Business Solutions , Breaking News

SECURE Act Opens Door to Wealth Transfer Alternatives and Charitable Gifts


The Setting Every Community Up for Retirement Enhancement (SECURE) Act has presented wealth advisors with multiple opportunities to remain a step ahead of legislation, all while helping clients and their families plan for a sound financial future.

Throughout this email series, we’ve discussed many of these opportunities, as well as where and how they intersect with the services provided by Belman Klein Associates.

Of note, the “stretch” IRA, has long been considered a remarkable financial tool for setting future generations up for success. Over time, IRAs have come under fire for being used for wealth transfer instead of strictly as retirement vehicles. The SECURE Act limited the payout period of an inherited IRA in an effort to quell this usage.

By choosing the right collaborative insurance partner, however, there are always options available.

Estate Planning Does Not Necessarily Have to Include an Estate Tax

As mentioned, leveraging life insurance allows advisors to bring the focus back to wealth transfer using concepts like the IRA Max. This unique solution assumes that clients are nearing or are already enjoying their retirement. But there are no barriers to commencing this type of transfer planning at an earlier date.

A simple term insurance policy equipped with a good conversion option can help your clients hedge against future law changes and issues with insurability.

Ideally, the process would occur throughout the wealth accumulation phase, with the insurance serving as income protection. As clients get older, these policies can be converted to permanent insurance coverage better suited to planning for a financial legacy.

The result? The client maintains the medical underwriting attained at a younger age, thus locking in insurability. Purchasing term vs. permanent insurance allows clients to take steps towards a lucrative financial future for pennies on the dollar.

For the Charitably Inclined

The SECURE Act drastically cut the time frame for liquidating a retirement account from the life expectancy of the beneficiary to just 10 years. But by naming a charitable remainder unitrust (CRUT) as an IRA beneficiary, your clients can extend this period beyond that window. Part of the IRA’s stretch ability will be reinstated post death, with a percentage of the assets being paid out to designated heirs over a predetermined period of time, and the remainder at the time of the beneficiaries’ death being left to the charitable legacy.

Clients may also choose to repurpose a portion of their Required Minimum Distributions (RMDs) to pay the premium on a life insurance policy, and name their heirs as beneficiaries, along with a charitable cause. The split is determined by the client, but the approach allows a client’s heirs to offset new taxation created by the SECURE Act, while a lump sum donation is made to a charity.

The SECURE Act is Just Another Stepping Stone to a Secure Future

The “stretch” IRA may be gone, but with the right collaborator, the future is rife with opportunity. Belman Klein Associates looks forward to helping you and your clients to plan for taxation brought about by the SECURE Act, while setting up guardrails around their financial futures long before retirement age.

Now that you’re aware of the possibilities, let’s schedule a consultation and explore them in more detail together.

*In some instances, a Tax Advisor and/or Attorney should also be contacted for counsel. Although the information contained here is presented in good faith, it is general in nature may require additional consideration of other matters. This report is for informational purposes only.