Retire Safe & Tax Free - Who Inherits Your IRA? Part 2


two generations

The Multigenerational IRA

The Multigenerational IRA concept has been around since 1999 when the Internal Revenue Service (IRS), in a Private Letter Ruling, stated that a man who inherited his mother's seven-figure IRA could name his own beneficiaries. This concept was refined further in 2001 when the IRS simplified IRA guidelines and did away with most of the old complex pay-out rules. This included the landmark revision of the Required Minimum Distribution Table for IRA owners.

Lower Required Minimum Distributions

Lower Required Minimum Distributions (RMDs) allowed IRA owners to reduce the amount of withdrawals and thus lowered subsequent income taxes due on those mandatory distributions.

An exciting new opportunity for clients and planners was created as a result of the above events. The lower RMDs also made it possible for IRAs to actually outlive their owners! The great news doesn't stop here. The new RMD table even made it possible for the IRA to outlive the beneficiaries! This opportunity is spelled out in black and white in the IRS code. No smoke, no mirrors and no exotic sales chatter. The IRS has acknowledged that people in our country are living longer, and therefore reduced RMDs out of necessity and public interest.

Since the IRS began embracing the concept of stretching distributions, IRA owners can now create a legacy of income for their children and grandchildren. Remember MGIRA may be used for IRA, 401(k), 403(b) and SEP-IRA funds. There is $14 trillion of money waiting to be stretched. So why hasn't MGIRA planning caught on like wildfire? Is it too good to be true?

The key is to ask the right questions and make sure the answers provided are what you need to hear.

If your financial institution does not offer what you want, you may want to consider transferring your IRA to a financial institution or custodian that does because they are out there and they are ready to help you. Remember, beware of potential pitfalls! There are two things that can destroy your good intentions of MGIRA distribution planning: Your Beneficiaries and Your IRA Custodian.

Your beneficiaries may not be aware of the MGIRA opportunities and what that could mean for them financially, so dare to have that conversation your heirs! Even if you think it may be uncomfortable what is a little discomfort compared to gaining thousands or perhaps hundreds of thousands in potential distributions?

What if your IRA Custodian does not allow an MGIRA Strategy? Many financial service institutions allow beneficiaries to use MGIRA distributions over the individual life expectancy of each named beneficiary. Unfortunately, not all of them do. The IRA plan documents will include provisions or language that describes the permissible distribution options for beneficiaries.

If you have questions, then you should possibly give me a call and I look forward to it! What do you think?

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

(818) 610-8560