Last fall, the Senate Finance Committee passed proposed legislation called the Retirement Enhancement and Savings Acts of 2016 (RESA), which eliminates the stretch IRA
, requiring individuals who inherit IRAs to withdraw funds over the five-year period following the original owner's passing.
3 reasons to replace the stretch IRA
with life insurance
For example, if a beneficiary of her father's IRA elects to take distributions over her fife expectancy (commonly called a stretch IRA
payout), what portion of the annual minimum required distribution (MRD) is IRD?
The Obama budget would eliminate the stretch IRA
that allows beneficiaries to stretch the proceeds from an inherited retirement account over their lifetime.
thumbs up] (3) The stretch IRA
may be safe for now, but it's about time that it was eliminated IRA accounts are not meant to act as estate planning tools, they are meant to provide retirement income to the account owner.
A Stretch IRA
is a tool that can increase wealth for beneficiaries over several generations.
In Michigan, effective for 2005, a new Income and Principal Act goes in affect allowing post death payments of a stretch IRA
to be taxable to the beneficiary of the stretch trust.
Unless your clients are not going to be worth more than the exemption amount at the time of death and their heirs will be in the same or lower tax bracket from the time of the client's retirement until death, carefully consider whether a Stretch IRA
is the best solution to maximize wealth transfer.
Even if measures like the stretch IRA
elimination don't come into effect, it won't hurt to have it.
Calculator--analyzes the estate and income tax impact of a client's IRA at death.
Caution: When implementing the stretch IRA
strategy, clients should keep in mind that amounts not deposited into an IRA by the applicable 60-day deadline generally are taxable as a distribution and are potentially subject to the 10% penalty applicable to distributions received by taxpayers who have not attained age 591/2 at the time of the distribution.