SECURE 2.0 and Your Retirement Accounts: What Your Beneficiaries Need You to Know

Aug 15 2026

By: John Drapp

For most families, a retirement account is the largest asset left behind at death. Since the SECURE Act (2019) and the SECURE 2.0 Act (signed December 29, 2022), how that account passes to your loved ones, and how much of it they keep after taxes, has changed significantly.

Where the 10-Year Rule Stands

Before the SECURE Act, most beneficiaries could stretch inherited retirement account distributions over their own life expectancy. Today, most designated beneficiaries must empty the account within 10 years of the owner's death. Compressing that timeline can push a beneficiary into a higher tax bracket and shrink the inheritance.

Certain "eligible designated beneficiaries" are exempt from the 10-year rule:

Surviving spouses
Beneficiaries not more than 10 years younger than the account owner
The owner's minor children (until they reach the age of majority)
Disabled and chronically ill individuals

What SECURE 2.0 Added

SECURE 2.0 clarified and expanded the original law. Highlights include:

Later RMDs. The required beginning date moves to age 73, and to age 75 by 2033.
Lower penalties. The penalty for missing a required minimum distribution drops to 25% of the amount missed, and to 10% if corrected in a timely manner.
Automatic enrollment. New 401(k) and 403(b) plans must generally enroll employees automatically, with a 90-day window to opt out.
Higher catch-up contributions for older participants.
Long-term care. Penalty-free early withdrawals are allowed to pay for certain long-term care contracts.
Charitable remainder beneficiaries. A qualified charity can be named as remainder beneficiary after the death of a disabled or chronically ill beneficiary without disqualifying the trust as a "see-through" trust.
Student loan matching. Employers may match student loan repayments as if they were elective deferrals.
529-to-Roth rollovers. A 529 plan held for at least 15 years can be rolled into a Roth IRA, up to a $35,000 lifetime limit.

SECURE 2.0 also adds exceptions to the 10% early distribution tax, including for qualified birth or adoption expenses, terminal illness, federally declared disasters, emergency personal expenses, and domestic abuse victims.

Why Your Existing Plan May Need a Second Look

Conduit trusts. Many trusts drafted before 2020 contain a conduit provision, which requires the trustee to pay out retirement distributions to the beneficiary as they are received. Under the 10-year rule, a conduit trust can force the entire account out to the beneficiary within a decade, defeating the creditor, divorce, and lawsuit protection the trust was meant to provide.

Accumulation trusts. An accumulation trust lets the trustee take the required distributions and keep the funds in trust, protecting them for the beneficiary. It may be a better fit for many families, though the tax cost of retaining income in trust has to be weighed.

Timing matters. If the owner dies before their required beginning date, beneficiaries generally don't need to take annual distributions during the 10-year period, but must empty the account by the end of year 10. If the owner dies after that date, annual distributions generally continue during the 10 years as well.

Consider a Stand-Alone Retirement Trust

A beneficiary designation form alone doesn't account for your goals or your beneficiary's circumstances. A trust designed to receive retirement accounts can address the 10-year rule while protecting the inheritance from creditors, lawsuits, and divorce. If a beneficiary has a disability or chronic illness, a special or supplemental needs trust can preserve eligibility for benefits and may qualify for the longer payout period available to eligible designated beneficiaries.

Check Your Beneficiary Designations

A trust only works if it is properly named. If you want a trust to receive the account, the trust must be listed as the beneficiary on the account's designation form. If you want an individual to inherit, name them there, and always name contingent beneficiaries. After a marriage or divorce, update your designations. Plan administrators generally pay whoever is named on the form, regardless of what your will or trust says, or what you would have wanted.

Charitable Strategies

If you are charitably inclined, retirement accounts are often the most tax-efficient asset to leave to charity, because a qualified charity pays no income tax on the distribution. A charitable remainder trust can also provide a lifetime income stream that mimics the old "stretch," though the income beneficiary still owes income tax on distributions. For larger estates, there may be an estate tax charitable deduction as well. We can also work with your financial and tax advisors on strategies to add cash to your estate at death, such as life insurance, to offset the accelerated income tax.

Let's Review Your Plan

If your retirement accounts are a significant part of your estate, your plan deserves a fresh look. Call Drapp Law PLLC at (203) 871-0356 to schedule an appointment.

This information is subject to the terms of our disclaimer.

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