Meurer & Potter Law Office, Denver, Colorado

The purpose of an IRA Stretch Trust is to ensure the long-term, tax-deferred stretch distribution of your IRA. It protects your legacy from creditors and ensures beneficiaries don’t immediately cash out funds. At the Meurer & Potter Law Office in Denver, we’ll help you determine if this is the right option for your estate and establish an IRA Stretch Trust that gives you peace of mind.

By stretching distributions, your beneficiaries have the ability to take advantage of your IRA tax deferred growth. These deferred taxes are similar to an interest-free loan, and taxes are only paid when money is distributed. This allows you to use funds from your IRA to invest and earn more money on a tax-deferred basis. The longer the money stays in the IRA, the longer it has to grow. An IRA Stretch Trust ensures that funds stay in your IRA for the longest possible time to take advantage of this growth.

Many financial advisors believe that by simply designating your children as beneficiaries, that they can achieve lifetime stretch distributions. However, the problem with simply naming beneficiaries on your IRA documents is that there is no mechanism in place to ensure smaller, ongoing distributions.

Without an IRA Stretch Trust, funds are still subject to creditor claims, bankruptcy, divorce, and a beneficiary’s desire to have the money now. In fact, it’s estimated that somewhere between 55%-65% of IRA beneficiaries will cash out an inherited IRA. This type of trust protects your beneficiary from making an impulsive decision and ultimately ensures they receive more money in the long run.

For a Trust to be used as an IRA beneficiary, the IRS requires that:

  1. The Trust is valid under state law.
  2. The Trust is irrevocable at death.
  3. The Trust beneficiaries are identifiable from the Trust document.
  4. All the beneficiaries must be individuals.
  5. Certain documentation must be provided to the IRA custodian by October 31 of the year following the death of the IRA’s owner.

If you’ve spent a lifetime contributing to your IRA and investing wisely, an IRA Stretch Trust can protect your funds from being wiped out by creditors or an heir choosing a one-time distribution without understanding the long-term benefit of stretch distributions or the tax implications of cashing out. At the Meurer & Potter Law Office in Denver, our experienced attorneys will assist you in creating your legacy and taking care of your family even after you’re gone.

Call or contact our offices today to schedule your free consultation: 303-991-3544