Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 33 years.

This valuable estate-planning tool can help your beneficiaries make the most out of their inheritance but many investors do not know about these stretch provisions. This leaves retirees with the important question: Should they force their beneficiaries to stretch the inherited IRA?

What is a “stretch IRA” strategy? A recent Forbes article titled Should I Force My Beneficiaries to Stretch My IRA? discussed Stretch IRAs and their impact with two brothers, Wealth managers Tom and Robert Fross. In the article, Tom thought it best to leave beneficiaries the full range of IRA distribution options. Why? Because trying to manage from beyond the grave does not allow for flexibility or changing family circumstances. Robert agreed but feels it is important to educate beneficiaries and ensure that they comprehend the benefits of stretching distributions across their own lifetime rather than withdrawing money all at once.

Indeed, “stretch IRAs” can be a worthwhile vehicle to allow children to get a head start on their own retirement savings. With proper planning, an inherited IRA can grow from a modest amount into a great sum of money, the Fross brothers agreed. However, they cautioned that it is critical to take some steps now to set your heirs up for success later. Robert explained that only the IRA’s named beneficiaries are able to leverage stretch provisions, so you must name your children or grandchildren as direct beneficiaries of the account, rather than indirectly as heirs in your will or beneficiaries of a trust. They also suggest working with an estate planning attorney to guarantee that the current custodian (e.g., bank, investment company, or insurance company) will allow beneficiaries to take advantage of an inherited IRA.

Also, educate your beneficiaries about inherited IRAs and make sure they understand the tax and financial advantages involved.

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