The Stretch IRA (the great parlay of wealth for your loved ones)

Although this is an incredible benefit to your beneficiaries, you first have to see if they will really benefit from it.  Remember, they do not have to stretch it over their lives.  They could take it all out right after you die and it will be taxed at that time.

The only way to force the stretch IRA (to make sure your children benefit from this greatparlay of wealth) is to name a trust as your beneficiary to force the issue.

But even then, if you have to force the issue, maybe you are better off leaving this child-children-or grandchildren other assets and leaving your IRAs to others who would get the true benefit of the stretch IRA.

Different beneficiaries will act differently…some will stretch; some won’t, some need a trust; others won’t.

Maybe the stretch IRA, which is a benefit not for you, but only for your beneficiaries, is not that important to you.

A question that you must ask:

Reasons the stretch IRA may NOT be important to you:

Your retirement funds are in a 401-k and you are still working (the plan won’t stretch anyway.)  But under a special provision in the tax law allowing non-spouse direct rollovers from company plans, the stretch still may be accomplished even if your non-spouse individual beneficiaries inherit your company plan balance.

You are leaving the IRA to charity.  The charity does not need to stretch out the distributions.  They can just withdraw all the money and pay no tax, so the stretch IRA is not an issue here.

You have only distant relatives and no close family, and you are not concerned about who gets what’s left of your retirement funds.  You will be spending most of it during your lifetime anyway, and whatever is left they can just inherit.  They might still get the stretch IRA on whatever is left to them, but that is not a major concern of yours.

You are not concerned about the stretch IRA because you feel that your beneficiaries won’t stretch the funds anyway.  This can be forced though by naming a trust as your IRA beneficiary.

Post-death instructions for your family

Once your loved ones inherit, they will need guidance.  This is another reason why you need to find a competent advisor now, both for you and your loved ones who will inherit from you.

If you are interested in a FREE no-obligation consulation to see how you could benefit from working with me; call my office @ 336.254.8432 and my assistant will schedule a meeting.