Preparing for the Death of the Stretch IRAPreparing for the Death of the Stretch IRA

The term “stretching” an individual retirement account refers to the practice of partially sustaining the tax-deferred status of an IRA when, after the death of the owner, the account is left to a non-spouse beneficiary (typically a child or grandchild or perhaps more than one). Stretching an IRA, or a qualified retirement plan, such as an Internal Revenue Code Section 401(k) or Section 403(b) (hereafter all referred to as IRAs), can provide significant financial advantages for the owner’s heirs. These advantages can amount to hundreds of thousands of dollars for the first generation and sometimes millions of dollars for the second generation, if the stretch is sustained. 

In 2012, Congress introduced a formal proposal to eliminate the st...