Making Income Last Longer

From AIG Funds

Stretch Strategies for Owners and Beneficiaries

There are many useful techniques that can help extend the life of your IRA. One of the most common is splitting accounts. When multiple beneficiaries are named in one IRA, the IRS generally requires that minimum distributions be based on the life expectancy of the oldest beneficiary.

However, by splitting an IRA into separate accounts, the beneficiaries have the option to:

  • Stretch income based on individual life expectancies

This can be extremely beneficial if there is a big difference in age among the beneficiaries. For example, if one beneficiary is 20 years old and the other beneficiary is 80, the splitting technique allows the 20-year-old to take distributions based on his or her own age rather than on the much shorter life span of the 80-year-old.

  • Name a successor beneficiary

Once an IRA is split, each beneficiary also has the ability to choose his or her own beneficiary, thereby controlling where the assets go after death.

The split can be done by either the IRA owner or the beneficiaries. The IRA owner can split the IRA at any time during his/her lifetime. Upon the owner’s death, the beneficiaries have until December 31 of the year following the IRA owner’s death to split the account.

Contact your financial or tax advisor to learn more about this powerful stretch technique.