Estate Planning
spring 2023

SECURE 2.0 passes

Congress passed the 2023 Consolidated Appropriations Act just before Christmas.

The year-end spending bill included passage of SECURE 2.0, a retirement reform package.

SECURE 2.0 builds on the Setting Every Community Up for Retirement Enhancement Act of 2019.

It contains more than 80 provisions, including these notable changes:

Helping people make their savings last

Delays age for required minimum distributions (RMDs): RMDs now kick in at age 73 (up from 72).

The age increases again to 75, starting on Jan. 1, 2033.

Reduces penalties for RMD mistakes: The act reduces the penalty for a missed RMD from 50 percent to 25 percent.

However, if it’s corrected early, the penalty is only 10 percent.

Eliminates RMDs from Roth accounts: Beginning in 2024, RMDs will no longer be required from Roth accounts maintained under 401(k), 403(b), and government 457(b) plans.

Enables 529 to Roth IRA transfer: Beginning in 2024, if you have an unused balance in a college 529 plan, you can transfer those funds to your child’s Roth IRA tax-free.

Some caveats: The maximum transfer is $35,000 over a lifetime. The 529 plan must have been maintained for at least 15 years, and funds must have been in the account at least five years.

Creates new IRA spousal options: Beginning in 2024, spouses can elect a tax treatment as if they were the deceased spouse, instead of rolling the assets into their own IRA.

The upshot is that RMDs from the account would be based on the deceased spouse’s age, not the surviving spouse. That gives an older spouse more options.

Improving employee access to workplace-based retirement savings

Requires auto 401(k) enrollment: Effective in 2025, all new 401(k) and 403(b) plans must automatically enroll participants, with automatic increases of 1 percent until a set threshold. (Participants may still elect to opt out.)

Effective in 2025, all new 401(k) and 403(b) plans must automatically enroll participants, with automatic increases of 1 percent until a set threshold.

Increases catch-up limit: In 2025, the catch-up limit increases by at least $10,000 for those ages 60 to 63. (After 2025, catch-up limits are indexed for inflation.)

However, participants who earn more than $145,000 must make contributions on a Roth basis.

Allows employers to match student loan payments: When an employee makes a qualifying student loan payment, employers can now match those funds as a contribution to a 401(k) or other retirement plan.

Allows plan-based savings accounts: As a new savings mechanism, employers can automatically enroll employees in an emergency savings account, administered as part of their retirement plan.

Accelerates part-time eligibility: Part-time employees who work 500 hours in two consecutive years must now be given the option to participate in their employer’s defined contribution plan.

That is an adjustment from the previous three-year requirement.

Other changes

Creates new options for emergency withdrawals: Several changes will allow people to access their retirement savings penalty-free in an emergency, with special provisions for domestic abuse, terminal illness, or federal disasters.

The act also allows one penalty-free withdrawal of up to $1,000 a year for personal or family emergencies.

The act also allows one penalty-free withdrawal of up to $1,000 a year for personal or family emergencies, provided the funds are paid back within three years. (Effective dates vary.)

Mandates lost and found database: Within two years, the Department of Labor and the IRS are required to establish a searchable online database so individuals can see if they have money owed under a retirement plan. 

Establishes a savers match: The government is replacing an ineffective tax credit with a new “match” for lower income savers who contribute to a qualified retirement account.

Beginning in 2027, they can receive up to $1,000 in federal contributions to their account.

Talk to your estate planner about SECURE 2.0 and what it means for your personal situation.

Is a will enough?

Making proactive plans to transfer your estate can be a loving way to support and protect your family. A will is one critical piece that nearly everyone should have. But is it enough?

Depending on your situation and your estate, you may want to go a step further by establishing a revocable trust.

Sometimes referred to as a living trust, this is a legal arrangement that helps you determine how your assets are managed and distributed — both during your lifetime and after your death.

A revocable trust is like a figurative cardboard box that can hold all of your assets, including your real estate.

A revocable trust is like a figurative cardboard box that can hold all of your assets, including your real estate.

You can name your trust as the beneficiary of your life insurance and retirement accounts. While you are alive, you control the revocable trust.

Assets can flow in and out, and the trust can be changed or dismantled as long as you (the grantor) are alive.

Here are the key advantages of a revocable trust:

Avoid probate: Any property distributed through a will is subject to probate. This is the legal process that oversees administration of your wishes.

Probate costs vary but can often range anywhere from 5 to 10 percent of your estate. Having a revocable trust allows you to skip the probate process entirely and avoid those costs.

Ensure asset availability: Even simple estates can take nine months or more to get through probate. Again, a revocable trust skips that process.

On your death, a trustee that you name can immediately take over management and distribute assets as you directed.

Protect your privacy: The probate process is generally open to the public. That means your will and estate information will become part of the public record, available to anyone.

If you want to keep information about your assets private after your death, a revocable trust can provide that protection.

Stipulate requirements: Because your assets are being held in a trust, you can create additional stipulations on how your heirs will inherit the funds.

For example, you could specify that a grandchild needs to reach a certain age or finish college before receiving their inheritance.

Simplify beneficiary designations: A beneficiary designation names who will inherit an asset — such as life insurance and retirement accounts — when you die.

It’s not unusual for people to run into problems when their beneficiary designations don’t match up with what they specified in their will.

A trust can simplify that, especially if you want those assets distributed among a large number of heirs. You can designate your trust as the beneficiary, and then the assets can be distributed along with the rest of your estate.

Management continuity: A revocable trust can help you avoid court supervision of your property in the event you become disabled or incompetent.

Appointing a durable power of attorney can also serve this purpose; however, the revocable trust simplifies management.

Furthermore, it continues to protect you in the event your designated power of attorney is unable to serve.

Reduce challenges: A revocable trust is less susceptible to legal challenges than a will. It’s one thing for challengers to suggest you were coerced into signing a document.

It’s another to argue you were forced to go through the larger process of setting up and funding a trust.


Some people express concern about the costs.

Revocable trusts may be slightly more expensive to create up front, but the costs are significantly less than the cost of probate to the estate.

A revocable trust isn’t right for every family. In certain situations, you may actually prefer the safeguards and rigidity of the Probate Court.

It is also important to know that revocable trusts will not protect your assets from creditors after your death.

If you have an heir with known debt problems or a looming divorce, talk to an estate planning attorney about other mechanisms to protect their inheritance.

We welcome
your referrals

We value all our clients. And while we’re a busy firm, we welcome all referrals. If you refer someone to us, we promise to answer their questions and provide them with first-rate, attentive service. And if you’ve already referred someone to our firm, thank you!

IRS makes
inflation changes

A new year means new tax brackets and new standard deductions go into effect. That could lower income tax for many Americans, including those in retirement. Additionally, the changes give high-net-worth families additional opportunities to make tax-free gifts.

Increases in gift tax exemption

Along with inflation comes significant increases in the lifetime gift tax exemption for 2023 — jumping $860,000 to $12,920,000. An individual who had previously given away their full lifetime exemption of $12,060,000 can now make an additional gift of $860,000. Married couples will be able to give away double that.

New tax brackets

The IRS adjusts tax brackets every year. This is an effort to stop “bracket creep,” which is when inflation pushes taxpayers into a higher income tax bracket even though they didn’t get a real increase in spending power.

Income limits have shifted. For example, if your taxable income was $90,000 in 2022, your tax rate was 24 percent. In 2023, it drops to 22 percent.

Other changes

Contribution limits for 401(k) and related retirement plans increased to $22,500, up $2,000 over 2022.

The 2023 standard deduction for married couples filing jointly increased to $27,700 — an $1,800 increase over last year.

Contribution limits for flexible spending accounts increased $200.

Mileage rates increased by 3 cents.

The 411 on gift taxes

With graduation and wedding season ahead, you may be thinking about gifts to family and other loved ones. Perhaps you’ve heard about gift taxes and are worried about how that might affect your decisions.

The good news is, it’s OK to be generous (if you can afford it)! For many people, gift tax limits are really more about paperwork than actual taxes owed.

Let’s say you give your son $75,000. You would not have to pay any taxes on that gift, and neither would your son. “But wait?” you say. “Isn’t the annual gift tax exclusion just $17,000?” That’s where the confusion comes in.

In this situation, what you’d have to do is file a gift tax return showing that you gave your son $58,000 (that’s $75,000 minus the $17,000 annual tax-free gift). Currently, under federal tax law, an individual can give away up to $12.92 million in his or her lifetime and not pay any gift taxes on that amount.

Gifts over your annual gift tax limit count against that $12.92 million lifetime exemption. What that means is that the $58,000 taxable gift you gave in the example above would lower the limit on what your heirs could receive tax-free when you die.

With such a high limit, many people won’t incur any gift tax. Be aware, however: The lifetime exemption is set to drop to $6 million in 2026. If you expect your estate will exceed that amount, talk to your estate planning attorney about gift strategies.

Now for the extra details you should know:

Limits increase: The IRS adjusts the gift tax, so keep tabs on this annually.

Per recipient, per giver: That $17,000 limit doubles to $34,000 for married couples filing jointly. And it applies on a per recipient basis. So, as a couple, you could give $34,000 to each of your kids and grandkids, cousins, neighbors, etc., without having to file gift tax paperwork.  

Imagine you want to help your son and his partner make a down payment on a home. If you’re married, you could give them up to $68,000 (that’s $17,000 x 4; two recipients, two givers) before you have to fill out any extra forms.

All gifts of value: Annual gift limits apply to anything of value, including shares in the family business, adding someone to a real estate deed, or providing an interest-free loan. (The latter two can catch some people by surprise.)

Exempt gifts: Certain gifts are exempt from gift taxes, even if they exceed the limit. That includes financial support to dependents, assets transferred to a spouse, education-related expenses paid directly to the school, and medical payments made directly to the provider.

Lifetime exemptions can change: As indicated, the lifetime exemption is scheduled to drop to $6 million in 2026. That’s assuming Congress doesn’t change it. Future limits could go up or down.

Timing: If you plan to gift assets that will likely appreciate in value, talk to your estate planner about timing those gifts. It may be wise to give those gifts sooner rather than later. When you gift an asset, your beneficiary receives that gift at its fair market value. The advantage is that the gift can appreciate in your beneficiary’s account rather than driving up the value of your estate.

On the other hand, when an heir receives property after someone dies, they inherit on a stepped-up basis, meaning its market value on the date of the decedent’s death. So here again, it’s a good idea to review strategies with your advisors.

This newsletter is designed to keep you up-to-date with changes in the law. For help with these or any other legal issues, please call today. The information in this newsletter is intended solely for your information. It does not constitute legal advice, and it should not be relied on without a discussion of your specific situation with an attorney.