Death of ‘Stretch’ IRAs Would Mean Loss of Flexibility for Beneficiaries
If part of your estate plan is to leave a hefty IRA to your children or anyone else other than your spouse, you may want to start thinking about backup strategies now.
Finding a way to leave a legacy to your loved ones without increasing their tax burden has always been a complicated matter.
And, unfortunately for those planning to use a sizable IRA or qualified-plan account as part of their estate plan, it may become even more difficult if the Retirement Enhancement and Savings Act of 2016 eventually becomes law. The proposed legislation, which the Senate Finance Committee passed in September 2016, calls for the elimination of the so-called “stretch” provisions currently afforded non-spouse beneficiaries of IRAs and 401(k)s.
As it is now, designated beneficiaries who inherit one of these accounts take minimum required distributions based on their own life expectancy (not that of the original account holder), and they can stretch out those payments for as long as they like – extending the tax-deferral period dramatically.
