With the ringing in of every new year, there is always a new set of laws that go into effect, and this year there are two that directly affect trustees and beneficiaries in the state of Illinois.
The Illinois Trust Code (ITC)
The Illinois Trust Code (ITC) has replaced the Illinois Trusts and Trustees Act with several notable changes including:
Duty to Account and Inform
For trusts that become irrevocable after 2019, the trustee must notify each qualified beneficiary of the trust’s existence and whether the beneficiary may request trust accountings and a copy of the trust instrument. This notice must be given within certain prescribed time periods, such as 90 days after the trust becomes irrevocable.
A trustee must also send an accounting to each current beneficiary at least annually, and to all beneficiaries after a trust terminates.
Therefore, for those who have created a joint or reciprocal trust with their spouse in Illinois, now may be a good time to review your estate planning.
The second law that has taken effect is called the Setting Every Community Up for Retirement Enhancement Act (SECURE). SECURE has a great impact on retirement accounts.
SECURE increases the required beginning date (RBD) for required minimum distributions (RMDs) from your retirement accounts from 70 ½ to 72 years of age, and it eliminates the age restriction for contributions to qualified retirement accounts. But the most significant change affects the beneficiaries of your retirement account.
Under the old law, beneficiaries of inherited retirement accounts could take distributions over their life expectancy. However, under the SECURE Act, most designated beneficiaries are required to withdraw the entire balance of an inherited retirement account within ten years of the account owner’s death. This shorter time frame for taking distributions could cause your beneficiaries to bump into a higher income tax bracket, thus receiving less of the funds contained in the account that you had initially anticipated.
There are a few exceptions to this mandatory ten-year withdrawal rule, including spouses, beneficiaries who are not more than ten years younger than the account owner, the account owner’s children who have not reached the “age majority,” disabled individuals, and chronically ill individuals.