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IRA Multi-Generation Distribution Payouts
By: Jeff Mcleod
Many retirement savers spend much of their working life building their
retirement nest egg through the use of Individual Retirement Accounts (IRAs).
The savings can be a significant part of their security throughout the
retirement years. When retirement time arrives, the plan is simple. Utilize
these accounts for a steady and dependable source of income, which will help
supplement other sources of income. For many individuals, this is exactly what
they will do.
For others, IRAs are a source of potential income that may not be needed.
Converting these accounts into income often means a tax burden that is not
necessary. One would rather pass this power of income with tax deferral onto
their heirs, essentially creating a legacy of growth and income for multiple
generations.
For anyone who has an IRA, qualified distributions are required to begin by age
701/2
and must be taken over the owner’s life expectancy. The owner may always choose
to take out more if they need, but they have to take out a minimum based on
their life expectancy. If you are fortunate enough to need only the Required
Minimum Distribution (RMD), you may find yourself in the position to leave a
significant amount to your heirs. Prior to recent tax law changes this would
mean an additional tax burden on those you care about the most. Before these
changes, a complex, and often costly plan was used to pass on the legacy you
wanted to leave to your beneficiary(ies). Your beneficiary’s only other option
was taking the full distribution spread out over a maximum of five years. This
may have caused unwanted tax liability and severely limited the future growth
potential of the inheritance.
A New Opportunity
The internal Revenue Service (IRS) has made significant changes to the tax law,
making it easier to set up and pass on an IRA to you heirs. They have also
defined how the wealth may be distributed once you have pass on. Due to the
structuring of the payout process, the beneficiary(ies) is allowed to “stretch”
the distributions over their own life expectancy. This will allow them to spread
out their tax liability as long as possible, which allows that legacy to
continue to grow tax-deferred and provide income for a number of years.
This concept is called Multi-Generational Distribution Option, and specific
information is available at http://www.HappyRetiree.com
Stretch IRA Features
• Ensure an income stream to you and your heirs, while offering continued tax
deferral on your IRA. This created a legacy for your retirement nest egg.
• You have the ability to name multiple primary and contingent beneficiaries.
These can be changed at any time until death of the contract owner.
• Gives the beneficiary the ability to spread out the taxable liability over a
number of years, as well as take additional amounts of income from the account
if needed.
About the Author:
Jeff McLeod is a certified IRA distribution advisor. http://www.ira-guide.com |
