Legal Blog

The Weekly Scenario: Stretch IRA

Question: What is a ‘stretch’ IRA and can I stretch other types of retirement accounts?

Answer: The term ‘stretch IRA’ is an invented word that goes by other names (you may also hear other names for the same thing such as “Legacy IRA” or “Generational IRA” or the “Hundred Year IRA”).

A stretch IRA, rather, is a process, not a product. A stretch IRA means keeping your inherited account growing tax deferred for your beneficiaries for as long as legally allowed.

But it is not so easy to stretch ‘other’ type plans such as your company retirement plan. While the IRS generally allows the stretch for beneficiaries of these plans, most companies do not permit it. Employers don’t want the cost and administrative burden of paying out distributions many years after an employee’s death.

Most companies prefer to cash out the deceased employee’s plan soon after death, but certainly no more than 5 years after death. Fortunately, it is very easy to create an IRA and it is generally recommended to roll over your 401(k), 403(b), 457, etc. plan to an IRA soon after retirement.

 

As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.

ABOUT STEVE SHANE

Steve Shane Casual Small

sshane@offitkurman.com | 301.575.0313

Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.

 

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 140 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eleven offices serve individual and corporate clients in the Virginia, Washington, DC, Maryland, Delaware, Pennsylvania, New Jersey, and New York City regions. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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