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A Look at the “Stretch IRA” Transfer Technique

February 8, 2013 by John Potter

If you plan ahead intelligently with the assistance of a good estate planning lawyer you will be aware of your options for transferring your assets to your loved ones.

One of the options available in appropriate circumstances is the “stretch IRA” transfer technique.

Individual retirement accounts come with tax deferral advantages built-in. This is intended to assist individuals who are planning ahead for their senior years.

However, it is possible to take steps to allow a beneficiary to take advantage of this tax deferral by “stretching” the individual retirement account.

With traditional IRAs you must pay taxes on the distributions because you made the deposits with pre-tax earnings. You must also start taking distributions when you are 70 1/2 years of age even if you don’t particularly need the money.

If you pass away with resources remaining in the account, your beneficiary will assume ownership of that remainder. He or she could then stretch the account by taking the minimum annual distributions that are allowed by the Internal Revenue Service.

This would prolong the tax deferral advantages.

With a Roth IRA you make contributions with after-tax earnings so the distributions are not taxed. And, you are not required to take anything out of the account like you are with a traditional IRA.

So, you could contribute into a Roth IRA for the specific purpose of providing an inheritance to your beneficiary with inherent tax deferral advantages.

 

The Potter Law Firm is an estate planning and elder law firm with offices in Ashland, Kentucky; northern Kentucky; and the Ballantyne area of Charlotte, NC.

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John Potter

Latest posts by John Potter (see all)

  • What Happens If I Leave Assets Out of My Living Trust? - February 15, 2019
  • What are the Advantages of an Irrevocable Trust? - February 14, 2019
  • Charlotte Medicaid Attorneys Explain How to Protect Healthy Spouses - February 11, 2019

Filed Under: Estate Planning, Retirement Planning Tagged With: IRAs, Long-Term Planning, Retirement Planning

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Testimonials

My husband and I selected Ms. Potter to assist with our small business. She responsive and attentive every time I have a question or need assistance, and is extremely knowledgeable and able to answer any legal question I have had. I know I can count on Ms. Potter for all of my business legal needs and I would highly recommend her to anyone needing legal assistance with such.
Jillian
Overall The Potter Firm was very professional. They took what could of been a very complicated process and were able to break it down so it was a lot easier to understand. We are confident we now have made the right decisions in our estate planning. Good firm to work with.
DKS & KMS
John Potter has been a real pleasure to work with. He is very knowledgeable and explains things in a very simplistic manner so the average person can understand how/why the laws are written. He is very attentive and asks questions in such a way that not only helps him understand your goals, but also helps you think about what type of goals and expectations you should be considering. Exemplary client service.
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1620 Carter Avenue
Ashland, KY 41101-7631
Phone: (606) 324-5516
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15720 Brixham Hill Avenue
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