July 24, 2020

Estate Planning Considerations Under The SECURE Act and the CARES Act

by William Browning, Isaac Wiles Burkholder & Teetor LLC

The SECURE Act, the CARES Act and political uncertainty require rethinking some of our core estate planning principles. The rapid increase in the federal budget deficit, combined with potential political changes in November, may result in more uncertainty for the future of the Estate & Gift Tax Unified Credit. The new limitations to inherited IRAs and other income tax changes also require a reboot to our planning. It will be important for financial managers and tax advisors to understand the many implications created by these new Federal Acts.

Provisions for delaying Required Minimum Distributions is a welcome option and recognition of longer life expectancies. Likewise, allowing continued contributions to retirement accounts past age 70.5 is an acknowledgement of the reality that many middle-class Americans are working well into their 70s.

The new rules relating to “inherited IRAs” require that we adjust our overall planning for participants and beneficiaries. Where possible, we must consider retired or low-income beneficiaries vs. high-earning beneficiaries. Trusts and wills may require revisions to include provisions which treat potential IRA distributions as an “advance” to equalize distributions. We must also consider charitable giving and conversions of IRAs to Roth IRAs. While the interest in charitable-type trusts has been waning, this type of planning allows for distributions to a child, while avoiding or reducing the income tax consequences.

While most of the provisions under this legislation are temporary, the possibility of having tax filings delayed and allowing liberal withdrawals from retirement accounts could become permanent. In some circumstances, withdrawals in calendar year 2020 may be beneficial.

The federal subsidies extended to individuals and businesses to ease the pain of the pandemic will certainly require either a tax increase or reduction of benefits in the future. As neither party seems interested in reducing social spending, the likelihood of tax increases is high. The SECURE Act is, at its core, a tax increase. The possibility of a Biden administration with Democratic control of Congress would most certainly lead to tax increases. Candidate Biden has already signaled that he would like to repeal the Trump tax cuts and goes further in suggesting that the “stepped-up” basis rules will also be eliminated. Once Congress initiates the process to reexamine the federal estate tax, it seems likely that the Unified Credit will be a focus, which is easier to implement than a “wealth tax”. In those circumstances where the family’s wealth exceeds $3 million, and one of the spouses has died in 2019 or 2020 we should consider implementing the “portability election”. These returns must be filed within 24 months, after death.

Not knowing the future of the Unified Credit, or if/when it’s to be changed, we recommend:

  • Gifting in calendar year 2020 to preserve the Unified Credit before it is reduced
  • Participating in charitable gifting plans
  • Accelerating income into 2020
  • Pushing deductions into 2021
In periods of great uncertainty and potential changing legislation, careful planning and structure are paramount.


In periods of great uncertainty and potential changing legislation, careful planning and structure are paramount.