If 2020 wasn't enough with the negative effects of COVID-19 on our economy, many consumers are likely to change some aspects of their legacy planning based on the SECURE Act (Setting Every Community Up for Retirement Enhancement), which was enacted last year.

In 2021, you want to explain how the SECURE Act has eliminated some post-death provisions for beneficiaries in estate plans – including one philosophy nicknamed the "stretch IRA." Before 2020, the stretch IRA allowed non-spouse beneficiaries to extend retirement plan payouts – and tax deferral on those payouts – over the non-spouse beneficiaries' lifetime.

The SECURE Act replaced the lifetime expectancy of taking distributions with a 10-year rule. Most assets can pass onto a spouse without facing taxes until the living spouse dies. However, all inherited IRA assets by a non-spouse beneficiary, with limited exceptions (including those who are minor children or disabled), must be distributed within 10 years of the IRA owner's death.

Your clients also need to take into consideration the SECURE Act's effect on trusts, which is designed to protect funds when multiple beneficiaries are involved. Without the stretch IRA philosophy used frequently in trusts, beneficiaries could find themselves paying more taxes on distributions, or if the funds remain in the trust, higher tax rates on the trust.

How could the SECURE Act changes affect your client's legacy to their non-spouse beneficiaries? These assets will frequently become a deferred tax liability since those ultimately inheriting the funds (which will often be the children) may see their assets taxed at very high marginal rates.

AIP Marketing Alliance recommends that you talk to your clients about a potential solution, permanent life insurance, for funding their estate plan or trust instead of an IRA. Permanent life insurance has some very good options and guarantees to present to your clients.

• Life insurance is income tax-free to non-spouse beneficiaries
• Increased flexibility and control of payments to beneficiaries when a trust is involved
• No worries about complex tax rules, and beneficiaries do not need to take RMDs
• A tax-free death benefit can be provided to beneficiaries in lieu of an account that could be taxed at high marginal rates

A permanent life insurance policy could assist your clients. Still, you will have to review their current situation to see if this solution could work toward their legacy goals. While presenting this option to your client. As always, your client should discuss trusts and taxes with their own tax and legal counsel.

If you would like some support materials about the SECURE Act, AIPMA has multiple carrier-approved resources that outline how permanent life insurance continues to be a viable option in 2021. Please contact our Business Development team at (800) 783-5206 Press #2 or email marketing@aipma.com.