Retire Safe & Tax Free - A Clever Tax Tool for Your IRA's


Okay, it has been said that Uncle Sam owns up to one-half of your IRA monies in taxes when you take distributions during retirement. But what to do to reduce this hellaceous impact on your income?

Giving to multi-generations

The tax act of 2001 has given you the opportunity to create a Multi-Generational IRA to protect, preserve and defend your IRA against the increases expected in taxes in the future.

What is a Multi-Generational IRA? It is a concept not a product. It involves taking a plain-vanilla IRA and designating beneficiaries. That's all there is to it, but the importance of designating a beneficiary cannot be overstated. If the IRA goes through the will, you do not get the stretch - which is the stretching of IRA distributions beyond our generation to our heirs when we are done using the money.

Based upon IRS regulations issued after the passage of the 2001 tax act, it has been said that if a beneficiary has a pulse and a birthday, the stretch is available. When individuals are the designated beneficiaries, they may take distributions from any inherited IRA over their own life expectancy. If the primary beneficiary has a successor beneficiary in place at death, the successor beneficiary has a successor beneficiary may continue taking distributions over the primary beneficiary's remaining life expectancy.

For example, let's say that the owner's 40 year old son inherits an IRA. At age 40 the son has a life expectancy of 43.6 years. If he dies in ten years, assuming he named his daughter as a successor beneficiary, she may continue receiving distributions for the remaining 33.6 years of his life expectancy! The period of distribution remains the same – the primary beneficiary's remaining life expectancy - even if a grandchild is named successor beneficiary.

If a longer period of stretch is desired, an IRA owner could designate a young grandchild as the primary beneficiary. A one-year old has a life expectancy of 81.6 years according to IRS tables, the maximum possible stretch. But take into consideration the entire period of IRA growth during both the owner's life and the life expectancy of the designated beneficiary . . . an IRA can conceivably last for more than a century.

Please call me today if you have questions about your IRA. I look forward to hearing from you!

Contact: Marc H. Weiss, Archer Weiss Insurance and Financial Services

(818) 610-8560