Heres an estate-planning technique that allows you to lower the tax sting to your heirs, and that reduces your retirement income in case you dont think you will need all of your Individual Retirement Account funds in retirement. Its called a stretch IRA, or Multi-generational IRA, a complex investment tools that allow you to extend the tax-deferred status of your IRA long after your death.
By naming your children and grandchildren as the beneficiaries of your retirement assets, you enable them to stretch out the annual distributions of that IRA over the course of their lifetimes.
Structuring the stretch
There are four primary approaches to structuring a stretch IRA; the traditional, spousal-rollover, participant-direct and the mixed, or combination, approach.
In the traditional set-up, your spouse is the primary beneficiary and your children or grandchildren are the contingent beneficiaries, however distributions and income tax deferral are extended only through the life expectancy of the oldest beneficiary. By using the Spousal Rollover Approach instead, your spouse remains the primary heir and children or grandchildren become the beneficiaries with...
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