Technically, there is no such thing as a stretch IRA. Once you name individual beneficiares, they automatically have the right to use their own life expectancies for their RMDs after inheriting it. The question is whether they will just take the RMDs or take out the proceeds much faster than that. The only way to limit their options to the RMD amount would be to leave the IRA to a qualified trust that limits distributions to RMDs and make them the trust beneficiaries.

In order for each beneficiary to use their own life expectancy, they would have to create separate account no later than 12/31 of the year following the year of your death. If they do not do that, then the life expectancy of the oldest will apply to both beneficiaries. If you were afraid that the separate accounts would not get done, you could split your IRA into two accounts now, and make each the beneficiary of one of them.

It is important to know that a non spouse beneficiary can never roll over an inherited IRA. They can change IRA custodians only by doing a direct transfer to the new custodian. When your non spouse beneficiary names their own successor beneficiary, that sucessor beneficiary does NOT get to use their own life expectancy. They must withdraw using the same schedule as your original beneficiary.

The full strategy of stretching an IRA includes all of the following:
1) You take out only your RMDs while alive, no more
2) You name a spouse or younger individual beneficiary or at least a qualified trust, NOT your estate as your beneficiary.
3) If individuals, they create separate accounts by the deadline (if there is an age difference).
4) Your beneficiaries take out no more than their RMD.

As you can see from the above, if you OR your beneficiary needs the funds faster than your RMD allows, you are reducing the stretching potential of the IRA. Much of this therefore, is just the discipline and financial assets sufficient to avoid taking out more than necessary.

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