Many people have built up large amounts of assets in their IRAs.
After your lifetime, how will these assets impact the people who inherit them?
Leaving large sums to others can be beneficial or sometimes cause problems. What happens to the money if they receive a lump sum? Will they be able to manage the money well? Will there be unforeseen circumstances such as debt, divorce, or market fluctuations that could deplete all the funds?
In the past the “lifetime” stretch feature protected those inheriting IRA assets. They were able to stretch out payments over their entire life, thereby protecting the IRA’s principal value.
The Secure Act has now limited that protection to 10 years, except for spouses and a few other exempt groups. All other beneficiaries must receive all the IRA assets within 10 years
after the death of the original owner.
|Annual Income||Annual Income and Lump Sum Distribution*|
|Fed Tax Bracket||24%||$24,000||37.0%||$407,000|
|CA Tax Bracket||9.3%||$9,300||12.3%||$135,300|
|*Withdrawals from a Traditional IRA can push you into a higher tax bracket, and those
withdrawals are taxed as ordinary income.
|Stretch IRA Protection Trust Concept
Parents establish a SIP Trust for adult child and spouse (ages 68) plus 3 grandchildren.
|Features: Two-Life plus 20 Years|
|Funding Value (IRA Value)||$1,000,000|
|Beginning Annual Payout||$50,000|
|Projected Payout at Maturity*||$110,000|
|Charitable Tax Deduction for Estate||$300,000|
|Total Income to Family over Lifetime||$3,600,000|
|Impact Gift to Your Community**||$2,000,000|
|*Income may vary annually as assets grow tax-free within the Trust
**Gift to charity after lifetime of all beneficiaries
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