Stretch Your IRA Dollars

In a recent article in Investors Business Daily (week of Dec 17, 2018) the article Stretch IRA: Shielding Savings From Tax Man provides a great description of an option to save a significant amount of tax if you will your IRA balance(s) to others who are younger than you are.

SPOILER: This information is provided to make you aware of this option and is NOT a tax or other financial advice for you specifically.  If this is of interest to you, then discuss this topic with your personal tax advisor or others to make determinations about your own individual situation before making any financial decisions.  

Here is a brief summary of the article and some of the strategy that is described.  

First, there are specific IRS rules regarding the distribution of an IRA based on the owner's age and potential longevity.  If the IRA balance is passed to your beneficiary upon your death and they are not listed as a beneficiary on the IRA specifically, the IRS rules may result in your being required to pay various taxes on that balance. It can also result in a distribution timeframe that is shorter than may be available to the beneficiary with proper transfer preparation.  This is true even if your beneficiaries are listed in a "3rd party" vehicle, such as a trust, will, etc.  

However, this article describes a strategy that is based on ensuring your desired beneficiaries are listed on the IRA directly and they take specific actions upon your death, or before.  When properly executed, the required distributions can be "reset" to different levels based on the age(s) of the beneficiary(s).  It can also have a significant impact on the tax liabilities that may come due after your death.  The strategy results in the creation of "inherited IRA" where the distributions are based on the age of the recipient.  

Important parts to be aware of when looking into this option:

1. The beneficiaries must be listed on the IRA directly, not via a third party vehicle, such as a will, trust, etc.

2. There are specific time frame issues that are necessary to follow for this transaction.  This is a critical element and is especially timely for deaths near the end of the calendar year, where some transactions must be executed by year end.

3. These strategies must be done BEFORE your death and the ability to utilize them can be lost upon your death.  PREPARE AHEAD OF TIME!

To read the entire article on this tax and inheritance strategy, visit this link: 

Inherited IRA Article Link

https://www.investors.com/etfs-and-funds/retirement/stretch-ira/

WhiteCoat Risk Management is not responsible for any actions you take or fail to take regarding any aspect of your financial planning.  This article is provided for information purposes and is not intended to provide individualized advice. You alone are responsible for your financial decisions.