Guaranteeing the Stretch of an IRA in an IRA Stretch Trust

The owner of an Individual Retirement Account (IRA) is entitled to name a beneficiary who will receive the account upon the death of the account owner. The beneficiary who inherits the IRA account does not have to withdraw it immediately upon the death of the prime account holder. The beneficiary can, and generally should, convert the account into an inherited IRA account and then take it out over beneficiary’s life expectancy. However, there is nothing to guarantee the beneficiary will do the right think with respect to the account – unless you name an IRA Stretch Trust as the beneficiary. What makes a IRA Stretch Trust different from other trusts is that it is designed to be ensure that, absent emergency, only the required minimum distribution (RMD) is taken out of the IRA every year. The rest is left inside the IRA to grow tax deferred. For individuals who have large IRAs, children with special needs, children with creditor problems, or individuals who want to name minor children or minor grandchildren as beneficiaries, an IRA Stretch Trust can be a vital part of an estate planning and tax planning strategy that includes a Will, Financial Power of Attorney and an Advanced Health Care Directive. If you have any questions about trust planning or IRA Stretch Trusts, please contact Wills Trusts and Estates Attorney Kevin A. Pollock, who is the head of the firm’s Trust Planning Department.

For more information on IRA Stretch Trusts, please visit my blog: Kevin A. Pollock BLAWG

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