On December 20, 2019, the US Congress passed the SECURE Act into law. With limited exceptions, this new law radically changes how most non-spouse retirement account beneficiaries will have to withdraw tax-sensitive retirement accounts.

Before the SECURE Act, a designated beneficiary could elect to receive payouts over the beneficiary’s life expectancy, which permitted the beneficiary to defer or “stretch” the receipt of the retirement benefits, resulting in smaller income tax liability on withdrawals and allowing the remaining funds to continue to grow tax free. For example, before the SECURE Act, if Client A died with a 50-year-old son or daughter, that child would have been able to withdraw from the IRA over a 34.2-year life expectancy period. Now, with limited exceptions, that 50-year-old beneficiary must withdraw the retirement benefits by the end of the 10th year following the death of Client A (the Plan Owner). Moreover, there will no longer be annual required distributions for most beneficiaries. Instead, all the retirement account assets must be withdrawn within that 10-year period.

What Type of Plans Does This Affect? With a few limited exceptions, this applies to all qualified retirement accounts, such as IRAs (both traditional and Roth), 401(k)s and other similar plans.

To Whom Does This Apply? The beneficiaries of a Plan Owner who dies on January 1, 2020 and thereafter.

Does the “Stretch” Still Work for Some Beneficiaries? Yes. The following are EXCEPTIONS to the new 10-year rule for designated beneficiaries:

  1. Surviving spouse – 10-year rule does not apply; a spouse can still roll over the plan benefits and withdraw over that spouse’s life expectancy and designate his or her own beneficiaries.
  2. Disabled and/or Chronically Ill Beneficiary – 10-year rule does not apply; can use life expectancy payout and this beneficiary does not even have to be related to the Plan Owner.
  3. Minor Child – 10-year rule does not begin until child reaches the age of majority (normally 18). But the Minor must be the child of the Plan Owner.
  4. Beneficiary Less than 10 years younger than Plan Owner – 10-year rule does not apply; can use life expectancy payout. For example, Client A dies and the designated beneficiary of his IRA is his brother, who is 5 years younger. Brother can withdraw over his life expectancy, and if he dies before exhausting the IRA, the IRA benefits that remain are required to be paid over a 10-year period to his beneficiaries.

Planning Considerations with the Exceptions

This is a very significant change that will likely impact everyone’s estate plan. It is prudent to review how these changes should be addressed in your own estate plans. In some cases, the use of trusts still makes sense and should be carefully evaluated. We are available to answer any questions you may have about this important change in the law.


This is general information about the new tax law. It is not intended to be legal advice to be relied upon by any recipient of this Memo.