Retirement Planning- 10 Stretch IRA Planning

Question 1

What are some planning pointers for Distribution Strategies at Death
Stretch IRA?

Answer 1

• Can be used by any Traditional or Roth IRA owner
• If Roth IRA held for 5 years, distributions are tax-free at
  death
• Some qualified plans allow Stretch option
• Select primary and contingent beneficiaries
• Can choose a designated revocable or irrevocable trust as
  beneficiary (but be certain trusts will qualify!)
• Can have one IRA with multiple beneficiaries (IRS Private
• Letter Ruling 2005370440) and split after death
  Appropriate for clients that don’t plan to use their IRA
  assets, except to take RMDs as needed, during their
  lifetime
  – Or at least to manage over a 10-year window?
• Appropriate for clients that are interested in leaving a
  legacy
• Critical to educate Beneficiaries about their choices

Question 2

What are the five rules if beneficiaries of a trust are to be considered designated beneficiaries of an IRA for stretch purposes:

Answer 2

1. Trust must be valid under state law
2. Beneficiaries must be identifiable from the trust instrument
3. Trust must be irrevocable or become irrevocable upon the death
   of the participant
4. Required documentation must be provided to the plan
   administrator by Oct. 31st of the year following the calendar year
   the participant died.
5. All beneficiaries of the trust must be individuals

Question 3

What are the reasons to use trusts?

Answer 3

• Conservation of Property
• Protection of Assets
• Squabbling Beneficiaries
• Inflexible Prototypes
• Minor Beneficiaries