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Advisor Insights

Surprises With SECURE's 10-Year Rule

Contributor Natalie Choate reviews the questions that some fiduciaries face today.

The SECURE Act is barely two months old. There has not been time for its provisions to be digested by advisors and administrators, let alone for the Treasury to issue regulations or even guidance. But some IRA owners and beneficiaries have died in the meantime, leaving fiduciaries to grapple with the bare statute. Here are some issues that fiduciaries are facing right now.

SECURE Applies to Some Deaths Before 2020
When Rodney died in 2008, he left his IRA to a "conduit trust" for the benefit of his daughter Eloise, who turned age 71 in 2009 (the year after the year of Rodney's death). Under a conduit trust, all distributions the trustee receives from the IRA (minus applicable expenses) must be paid out to the life (conduit) beneficiary as received. For minimum distribution purposes, Treasury regulations state that the conduit beneficiary is regarded as the sole beneficiary of the trust and of the retirement plan. Thus, the trustee was required to withdraw annual distributions from the IRA over Eloise's life expectancy of 16.3 years starting in 2009 and pass the distributions out to Eloise. The trustee faithfully did this every year through 2019.