Understanding Retirement Account Beneficiaries and the SECURE Act: What You Need to Know

Summary: Learn how the SECURE Act impacts naming a Trust as the primary or contingent beneficiary of a retirement plan. Contact Tim for an overview of retirement accounts.

To allow non-spouse beneficiaries to withdraw over their lifetime while protecting the retirement account (401k, 403b, IRA) from creditors, many attorneys recommended people name a Trust as the primary or contingent beneficiary of a retirement plan.

That way, non-spouse beneficiaries could withdraw money from an inherited retirement plan based on their life expectancy. Doing this spread the tax liability over an extended period and protected them from creditors if the beneficiary was in a Trust.


Signed into law in December 2019, the SECURE Act calls into question the benefit of doing this, especially if the Trust provides income for children or grandchildren.

The SECURE Act does not impact spouses. They can still take money out based on their life expectancy, starting when their deceased spouse reaches their required beginning date, now at age 72. If they prefer, spouses can transfer the IRA, 403b, or 401k into their own IRA.

Non-spouse beneficiaries who are ten years younger than the IRA owner must now withdraw all the money within ten years. However, they are not required to withdraw each year (after they reach adulthood, minor children are required to withdraw in ten years).

Disadvantages of Naming a Trust as Beneficiary

Some Trusts require that only the minimum amounts be distributed each year to the beneficiaries. However, from now on, for non-spouse beneficiaries, the only required distribution happens in year ten.

Sometimes, no distributions can be made until year ten, when everything is withdrawn and taxed. The Trust could end up paying higher trust tax rates on the income and dividends on the monies not distributed in years one through nine.

COVID-19 Complicates Things

The law went into effect in 2020. Because of COVID-19, some people have not met with their attorney to review the new law and change the Trust or the retirement plan’s beneficiaries. (For governmental retirement programs, 403b and 457, the law goes into effect in 2022.)

Trusts for retirement plan owners who died before 2020 can use the old law and remain useful planning tools. But unless the new law changes, there appears to be little benefit of naming a Trust as the beneficiary on a retirement account.

A simple solution is to replace the Trust as beneficiary and name new beneficiaries on the plan. You can usually download a form or get it from your financial advisor or plan administrator. If you are married, you could make your spouse the primary beneficiary and your children and grandchildren contingent beneficiaries.

These are the opinions of Financial Advisor Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only and should not be construed or acted upon as individualized investment advice. Content provided via links to third party sites should not be considered an endorsement of content, which we cannot verify completeness or accuracy of.

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Financial Advisor Tim Hayes

I’ve held an industry securities registration for 30+ years and am subject to SEC and FINRA oversight.

Most clients pay fee-only or an hourly rate. The size and complexity of the client’s wealth management and financial and retirement planning determine that fee.

Some clients pay a commission, mainly those with smaller accounts, i.e., Roth IRAs, some public-school teachers with 403b retirement accounts, or parents or grandparents who set up a 529 college savings plan.

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Subsequent meetings during which we monitor your progress and investments can be done in-person or by phone, email, Zoom, or Skype – or, more likely, a combination of these meeting types.

Contact Tim

Tim has offices in Boston and South Dartmouth, Massachusetts. He’s licensed to handle securities in 8 states: Massachusetts, Rhode Island, New Hampshire, New York, New Jersey, Connecticut, Maine, and Florida.

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