The SECURE Act: A Good Gift Planning Opportunity? | Sharpe Group
Posted January 2nd, 2020

The SECURE Act: A Good Gift Planning Opportunity?

Author note: This is an opinion piece. Feel free to disagree.


At the CGP national conference in New Orleans in October 2019, much discussion occurred in the Leadership session about the charitable gift planning opportunities under the SECURE Act, which was recently signed into law.

The SECURE Act eliminates the stretch-out IRA for non-spouse beneficiaries of a decedent’s IRA. Now, the non-spouse beneficiary must withdraw the entire IRA balance by the end of the tenth year following the decedent’s death.

For a high-earning beneficiary in his or her forties, fifties, or sixties, the tax hit may be tremendous.

Some in the CGP Leadership session argued that this tax hit creates a good opportunity for charities to promote the idea of leaving IRA assets to a CRT for the benefit of such a beneficiary.

One high-profile T&E lawyer I’ve encountered who works on such CRTs is on board as well.

I’m skeptical, although I’ve worked on such CRTs where the intended beneficiary is quite aged.

First of all, a CRUT will have to be used in a low-IRS-discount environment, such as exists currently. The 5-percent probability test will preclude using a CRAT in such an environment for all but the most senior beneficiaries. In January 2020, for example, when there will be a 2.0-percent IRS discount rate, a CRAT for the life of an individual younger than age 77 will flunk the 5-percent probability test.

Second, and more importantly, a CRUT for the life of someone aged 40-60 is going to run forever, practically speaking.

One way to deal with these two issues, which was raised at the CGP conference, is to leave the IRA assets to a CRAT or a CRUT for a fixed tern of 20 years. In my opinion, such a plan may work well for all concerned in some situations.

BTW, I’ve always liked the idea of leaving IRA assets to a CRT for a spousal beneficiary. I see it as a good way to provide and protect.

by: Jon Tidd, Esq

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