---
title: The “Never Ending” Story of the Stretch IRA
description: A proposed law could change what happens when you inherit an IRA.
image: http://www.wrapmanager.com/hubfs/blog-files/Stretch_IRA.png
---

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# The “Never Ending” Story of the Stretch IRA

Posted by [ WrapManager's Investment Policy Committee](https://www.letsassemble.com/wealth-management-blog/author/wrapmanagers-investment-policy-committee)  
 June 15, 2016

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![Stretch_IRA.png](http://www.wrapmanager.com/hubfs/blog-files/Stretch_IRA.png)At least we hope it’s a never ending story. About two years ago, [we wrote an article about the government potentially ending the Stretch IRA.](http://www.wrapmanager.com/wealth-management-blog/estate-planning-alert-is-the-stretch-ira-going-away) Back then, there was a proposal being floated that would require non-spousal beneficiaries to receive and pay taxes on IRA distributions within five years of the IRA owner’s passing. The law never materialized, and [Stretch IRAs are still a great potential tool for preserving wealth over generations](http://www.wrapmanager.com/wealth-management-blog/the-stretch-ira-a-wealth-preservation-strategy-thats-easy-to-use).

But here we are two years later, and the proposal is back again—this time as part of the 2017 White House budget. The administration is seeking to accomplish the same thing it couldn’t accomplish back in 2014, to “require non-spouse beneficiaries of deceased IRA owners and retirement plan participants to take inherited distributions over no more than five years.”  

In layman’s terms, it means that if you inherit an IRA from someone you weren’t married to, you have to distribute all of the funds within a 5-year period, and possibly be responsible for all the associated taxes. Today, a non-spouse person that inherits an IRA can “stretch” out their distributions over a lifetime, in hopes of reaping the long-term growth benefits of a tax-deferred IRA.

In the proposed law’s defense, IRAs were never designed to be “legacy” accounts – they were designed to give people the opportunity to save for retirement in a tax advantaged way, and then use that money for retirement. Once the retiree passes away, the tax break should theoretically end – and the concept of a Stretch IRA runs counter to that.

As long as it remains on the table, however, investors who have inherited an IRA would be wise to consider it as part of their investment plan. It’s difficult to argue against leaving assets in a tax deferred growth account for as long as possible.

## If the Stretch IRA Goes Away, Are There Alternatives?

In our blog post in 2014, we explored the possibility of converting IRA assets to a Roth IRA in order to give the investor the opportunity for more tax-deferred growth. Another option that could be on the table for the person trying to pass assets in a tax-advantaged way is naming a charitable remainder trust as your IRA beneficiary. When you do this, the assets grow tax-deferred, and you can set up annuity payments (monthly, quarterly, annually) to your beneficiary, like a grandchild for instance. After a fixed period of up to 20 years, whatever is left in the CRT is given to the charity of the deceased’s choice. All grounds are covered with this strategy: you pass your assets in a tax-advantaged way, your beneficiary is provided cash flows, and a charity of your choice and put your hard-earned assets to a cause.

**Working on Your Estate Plan and Have Questions? Call WrapManager Today**

In the very least, we encourage all investors to review their beneficiary designations at least once a year, to ensure that your assets flow to the right places in the event of your passing – and don’t end up in probate court. But if you want to bounce around some additional planning ideas for setting up beneficiaries and your estate plan, please do not hesitate to ask one of our Investment Managers for help! You can call us anytime at 1-800-541-7774 or send a quick note to [wealth@wrapmanager.com](mailto:wealth@wrapmanager.com). We look forward to hearing from you.

*The information presented by WrapManager, Inc. is general information only and does not represent tax or legal advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance. WrapManager, Inc. does not advise on any income tax requirements or issues.*

---

Source:

[Resource Planning Group](https://www.letsassemble.com/hubfs/Financial_Article_PDFs/June_2016/Roth_Stretch_IRA.pdf?t=1465670016179)

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