A key change of the Setting Every Community Up for Retirement Enhancement (SECURE) Act relates to the people you name as your beneficiaries.
Previously, all beneficiaries could take distributions throughout their lives. The SECURE Act preserved this option for spouses but repealed it for most non-spousal retirement plan beneficiaries. This group will now have to withdraw the entire amount by the end of 10 years after your passing. When they take any distribution, they will still pay income tax at their ordinary income tax rate.
Charitable Life Income Planning Strategies for the 10 Year Rule
If you would rather have your non-spousal beneficiaries receive their proceeds over their lifetime, you can:
- Designate a nonprofit like Texas Parks and Wildlife Foundation to establish a charitable gift annuity (CGA) or
- Name a charitable remainder trust (CRT) as the beneficiary.
After your lifetime, the retirement plan account proceeds will be used to fund the CGA or CRT. Not only is this a great tax strategy, but you can use your retirement account to spread the distributions over a beneficiary’s lifetime and ultimately support a charitable organization as well.
How They Work
Charitable Gift Annuity (CGA): You name one or two beneficiaries to receive fixed payments from the CGA for life. The rate of payment (determined by the ages of the beneficiaries) doesn’t fluctuate with the stock market, interest rates or inflation. After the beneficiary’s lifetime, the remaining balance is used to fulfill our mission and ensure all Texans to have access to the wild things and wild places in our state for generations to come.
Charitable Remainder Trust (CRT): You name one or more beneficiaries to receive payments from the CRT over their lifetimes or a term of up to 20 years. Beneficiaries can receive either a fixed amount (annuity trust) or a variable amount (unitrust). At the end of the term, the remaining balance goes to Texas Parks and Wildlife Foundation.
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