Stretch IRAs Can Be a Significant Wealth-Transfer Strategy

Stretch IRAs are a powerful use of annuities inside an IRA that can impact a surviving spouse, children, grandchildren and perhaps even great grandchildren. A living legacy that can generate income and accumulate tax-deferred is a remarkable wealth-transfer strategy. Stretch IRAs have been around for decades, but it should be reintroduced as a retirement and asset transfer option.

Legacy planning has generally focused on the most tax-efficient transfer of assets from one party to another within a family. Often, transferring assets requires the engagement attorneys and tax accountants to accomplish the proper trusts and tax strategies. But with Stretch IRAs, a seasoned financial advisor well acquainted with Stretch-IRA scenarios can accomplish wealth transfers with no fees or trust documents. Proper ownership titling is critical in the execution of a Stretch IRA, which is why setting up a Stretch IRA is not a do-it-yourself activity. This tax-advantaged concept can be a great alternative in assigning income streams of needed IRAs and Roth IRAs.

From time to time, there’s a degree of distrust transferring assets to an heir who has displayed poor financial decisions in their past. Instead of a lump-sum inheritance, a more piece-meal approach is desired for a spendthrift in the family or because of the age of a child.

Using a Stretch IRA strategy can amortize an asset by generated distributions scheduled over time, benchmarked to the life expectancy of the beneficiary. The longer the life expectancy, the lower the mandatory required minimum distributions (RMDs). The lower the distributions, the lower the ordinary tax liability.

Using children or grandchildren in Stretch IRAs could conceivably create decades of income, perhaps even a century for young children. Watch the interview with financial planner and IRA specialist Frank Oliver, as he lays out the basics of Stretch IRAs during the distribution period of retirement.

One of the funding vehicles for a Stretch IRA is a deferred income annuity (DIA). These annuities have recently become popular with the advent of Qualified Longevity Annuity Contracts (QLACs) where qualified plans can delay up to 25 percent of distributions to age 85 not to exceed $125,000. DIAs were designed to be guaranteed lifetime income you can’t outlive. Using DIAs inside a Stretch IRA can be purchased in blocks of income for targeted beneficiaries over generations. It’s an excellent income-management strategy for inheritance and tax planning. (A financial advisor with an understanding of Stretch IRAs can dramatically enhance your IRA’s economic leverage from one generation to another.)

Nationally syndicated financial columnist and talk show host Steve Savant interviews financial planner and IRA expert Frank Oliver on maximizing your retirement dollar. Right on the Money is a weekly financial talk show as a daily video press release Monday through Friday. (