1. The “Stretch” IRA Trust
Estate Plan
Revocable Trust
Pour Over Will
Advanced Medial Directive
Powers of Attorney
The “Stretch” IRA Trust
There are special rules for how IRAs and 401ks can be inherited. Unless these rules are followed non-spouse beneficiaries must liquidate an IRA within 5 years. This may result in large tax consequences. The “Stretch” IRA Trust allows the beneficiaries to take smaller distributions over their lifetime. This prolongs the IRA’s tax deferral benefit.
Copyright Winblad Law PLLC 2013

2. Advanced Medial Directive
Estate Plan
Revocable Trust
Pour Over Will
Advanced Medial Directive
Powers of Attorney
Example
IRA has $500,000 balance at death.
Beneficiary is 35 years old.
The investment grows at the rate of 8%.
The beneficiary lives to 80.
Copyright Winblad Law PLLC 2013

3. Advanced Medial Directive
Estate Plan
Revocable Trust
Pour Over Will
Advanced Medial Directive
Powers of Attorney
Without the Stretch
With the Stretch
Immediate withdraw of $500,000
The IRA still grows on a tax deferred basis. If the beneficiary takes the minimum required distributions she will receive a total of $3,607,285 in disbursements. The IRA still have an ending balance of $2,247,994.
Copyright Winblad Law PLLC 2013

4. Required Minimum Distribution Cumulative Disbursements
Estate Plan
Revocable Trust
Pour Over Will
Advanced Medial Directive
Powers of Attorney
Age
IRS Life Expectancy
Required Minimum Distribution
IRA Balance
Annual Disbursement
Cumulative Disbursements 35
48.5
2.06%
$500,000
$10,300 36
47.5
2.11%
$528,876
$11,159
$21,459 37
46.5
2.15%
$559,134
$12,021
$33,481 38
45.6
2.19%
$590,882
$12,940
$46,421 39
44.6
2.24%
$624,177
$13,982
$60,403 40
43.6
2.29%
$659,011
$15,091
$75,494 75
13.4
7.46%
$2,362,929
$176,274
$2,590,439 76
12.7
7.87%
$2,361,587
$185,857
$2,776,296 77
12.1
8.26%
$2,349,788
$194,092
$2,970,389 78
11.4
8.77%
$2,328,151
$204,179
$3,174,568 79
10.8
9.26%
$2,293,890
$212,414
$3,386,982 80
10.2
9.80%
$2,247,994
$220,303
$3,607,285
The beneficiary could name her spouse to receive the remaining distributions from the $2,247,994.
Copyright Winblad Law PLLC 2013

5. Advanced Medial Directive
Estate Plan
Revocable Trust
Pour Over Will
Advanced Medial Directive
Powers of Attorney
Other Considerations
There is no requirement that the beneficiary take only the minimum distributions.
Separate trusts can be established for each beneficiary if limiting disbursements are needed.
Copyright Winblad Law PLLC 2013