IRA Stretch Question

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  • #5332

    Starting in 2020 I think I read that a beneficiary of my IRA has only ten years to take the money out of the IRA that she has inherited. My niece will inherit a substantial amount when I pass. A lot of the money is in my IRA. I set up a trust for her that limits her to monthly amounts because she does not manage money very well. She will receive an amount in seven figures. Now this was done before the IRA “stretch” was eliminated and now I understand she would have to draw down the IRA over ten years. This means she would be receiving a six figure amount every year if she did it in equal amounts. This effectively undermines the trust I set up for her to limit the amount she can take. Is there anyway around this problem?

    • This topic was modified 1 year, 10 months ago by bill18163.
    Alan S.

    There are compromises possible, but they aren’t necessarily good ones. In fact, some conduit trusts out there limit distribution to RMDs, and under the 10 year rule there are no RMDs until year 10, meaning that the entire IRA would be taxable to the beneficiary in a single year. One possible alternative is to leave the IRA to a CRUT with the niece as the income beneficiary. This may well replicate the stretch in some form.

    Of course, first be sure the niece does not qualify as an eligible designated beneficiary for the stretch as before. If she is disabled, chronically ill or not more than 10 years younger than you, then she is an eligible designated beneficiary.

    Estate attorneys are rushing to review all current trusts, but could use some help from the IRS in revising Regs that no longer address many questions posed by the Secure Act.


    You will get over it… P1s are for chavs and slap heads. You will not regret the WR1 It grows on you I love ours more now than when we first got it

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