Estate Planning and the Stretch IRA

Retirement planning and estate planning are connected like links of a chain.

Many people are not in a position to say with certainty that they will have much left to leave to their loved ones after they pass away. There are different variables that come into play, such as your lifespan and the extent of the expenses that you may face coupled with the performance of your investments. There is considerable uncertainty in predicting how much money we might leave our family.

With the above in mind when you contribute to a traditional individual retirement account you are creating financial security for yourself and you are also potentially building a legacy to leave behind to your loved ones. There can also be a combination of security and a legacy if you use some of the resources but not all of them.

If there are funds remaining in your individual retirement account at the time of your passing it is possible for your beneficiaries to stretch the IRA. In other words, to receive the distributions over their life expectancy. To do this your beneficiary takes the minimum distribution that is required by the Internal Revenue Service.

Because the distributions are subject to income taxation the smaller they are the lesser the tax burden will be. So if you spread out the distributions over a maximum number of years the incremental tax payments will be as low as possible.

The younger the beneficiary is the less the required minimum distribution will be. Because of this, many people choose to make their grandchildren the beneficiaries rather than their children or their spouses.

If you have not yet developed a comprehensive, holistic plan for the future now is a good time to set up a consultation with an Oklahoma City estate planning lawyer. There is no substitute for expert guidance when you are planning for the future with the well-being of your loved ones in mind.

Larry Parman
Author, President and Founding Attorney
Parman & Easterday

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Larry Parman, Attorney at Law

Founder and Owner at Parman & Easterday

After helping his own family deal with a lengthy probate and the IRS following his father’s untimely death in a farm accident, Larry Parman made a decision to help families create effective estate plans designed to reduce taxes, minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors.

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