Important Update Effective January 1, 2020:

On December 20, 2019, President Trump signed the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) as part of the 2019 omnibus spending bill. The SECURE Act, which is effective January 1, 2020, makes the most dramatic changes to retirement account laws seen in the past decade. While most popular media have focused on the impact of the SECURE Act during the original retirement plan owner’s lifetime, you should be aware the Act also makes potentially catastrophic changes to the tax treatment of retirement plans for beneficiaries upon the account owner’s death.

For those planning to pass down retirement plans as an inheritance, these SECURE Act rules come as a devastating blow and new tax planning strategies may need to be explored. To learn more about the SECURE Act and planning options, you can download our free memo, SECURE Act: Major Tax & Estate Planning Implications​.

Strechout Protection Trusts (also known as IRA Trusts, Retirement Plan Trusts) are still a great tool for maximizing the stretchout options available, protecting your child's inheritance from future lawsuits, bankruptcy, and ensuring your retirement accounts stay in your bloodline. To learn more about Stretchout Protection Trusts, continue reading below:


A Stretchout Protection Trust that is specifically designed to receive your retirement accounts for tax efficiency and asset protection. A Stretchout Protection Trust is separate from your Will or Living Trust. During your lifetime, you remain the owner of your retirement plan, but you name the Stretchout Protection Trust as the beneficiary of the account upon your death.

Frequently, the Stretchout Protection Trust will be designed to match the distribution pattern of your Will or Living Trust, but the Stretchout Protection Trust is designed precisely to comply with the IRS rules. This will ensure that your beneficiaries remain eligible for the Inherited IRA “stretchout” option.

In addition to ensuring your beneficiaries get the most out of their “stretchout” option, a properly structured Stretchout Protection Trust can provide several powerful protections. If someday your child goes through a divorce, the retirement accounts are completely protected. If your child is sued or files for bankruptcy, the retirement accounts are protected. If your child dies, the Trust ensures that the funds remain in your bloodline and continue on to your grandchildren.

If your child or beneficiary is a minor, you can specify who should serve as Trustee while they are young. Plus, rather than your child gaining full control of the account at age 18, you can choose the age your child gains access to the account.

If your beneficiary is disabled or has special needs (or becomes disabled in the future), the Stretchout Protection Trust can qualify as a “Special Needs Trust” so that the assets don’t count against your beneficiary when he or she is qualifying for Medicaid, SSI, or similar government benefits. This built-in protection allows the inherited money to be spent on allowable expenses, typically things not covered by Medicaid or SSI, so that your beneficiary has a better quality of life while still receiving their important medical benefits.