Can the son or daughter that inherits their parent’s IRA while doing the stretch option, can they still name beneficiaries in case of a premature death? or does the stretch stop at their death?
And if they could name beneficiaries, would those beneficiaries be able to continue the stretch and who’s age would the distributions be based on?
Just confirming what Alan said about Stretch and the tax bill – I just read the latest Chairman’s markup (11/14) of the Senate bill and there’s nothing in it that kills the stretch for non-spousals. There was nothing in the House bill either. So breathing a small bit easier. I went back and looked at one of the documents associated with RESA 2016 that projected how much revenue killing the stretch would raise each year over 10 years and of course it pops starting in the 5th year, but even so, for the full 10 years, the estimate was “only” 3.2 billion, and the highest single year was under 600 million. So not a ton in the big scheme of things. I expect if it gets revived anywhere, it will probably still be as a payfor for expanding MEPs (multi-employer plans).
Perhaps one of the reasons for the low CBO estimate is that many non spouse beneficiaries are not taking advantage of the stretch now – they are cashing out the accounts or taking much larger distributions than the LE stretch requires. The other side of this coin is the question whether the IRS and custodians will be more successful in getting compliance with a 5 year rule than they have been for LE RMD compliance. I still expect that this is going to happen at some point, so if not with this tax bill maybe later.
Permalink Submitted by Alan - IRA critic on Fri, 2017-11-17 00:38
The successor beneficiaries named by the children will have to follow the RMD schedule of the children with the divisors continuing to be reduced by 1.0 each year. The stretch does not end, but the successor beneficiaries do NOT get a new stretch period, they just continue the present one used by ther children. The children should name their own successor beneficiaries ASAP after acquiring control of the inherited IRA. Be aware that in recent years the administration has proposed a mandatory 5 year rule for non spouse beneficiaries that was not acted on, and it is somewhat surprising that the current tax bills did not include this provision, since it will raise tax dollars over the next 10 years.