Stretch IRA

If a grandfather leaves his IRA to the grandchildren, and has just one account, is it true that the oldest beneficiary will be the age used for the RMD calculation?

AND, can someone discuss the Generation Skipping Transfer Tax issues.

There 11 grandchildren



If the grandfather leaves his IRA to the grandchildren from one account, they can split the IRA into eleven beneficiary accounts by 12/31 of the year after his death and each use their own life expectandy.

If instead the grandfather leaves his IRA to a trust, the life expectancy of the oldest beneficiary is used.

Often a trust is attractive when leaving an IRA to grandchildren because it can insure that only the RMD is withdrawn each year. When they are named individually any of them could cash in their share of the IRA as soon as they are no longer minors. Also if minor beneficiaries inherit an IRA, you should name a custodian under the state uniform transfers to minors act to handle the account until the child is no longer a minor.

Another variation would be to name 11 trusts as beneficiaries so that each could receive 1/11 of the IRA and use the individual grandchild’s life expectancy.

Every person has an exemption from GST tax, currently $2,000,000 going to $3,500,000 next year. If more than that is left to grandchildren, the GST tax is imposed. It’s a flat 45% tax. A good estate planning attorney can advise you on ways to eliminate our reduce the GST tax.



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