Maryland residents may be interested in the latest developments concerning stretching an inherited IRA. This means the distributions from it are readjusted or stretched to meet the new owner's life expectancy. Because most inherited IRAs go to children or grandchildren, the new distribution life can be very extended.
The issue of whether a beneficiary should be required to adhere to that distribution plan as opposed to being allowed to make the decision on when to take the money is open for discussion. Requiring a match with a person's lifetime may prevent him or her from accessing money should they need it for education, a medical emergency or any other life event. Trying to manage money from the grave can sometimes be a frustrating activity.
Proposed legislation may make this a non-issue. Congress is considering legislation that would require all inherited IRAs to be fully distributed within a five-year period. This would prevent beneficiaries from using an inherited IRA to help build their own tax-deferred retirement nest egg.
An IRA requires that beneficiaries be named within the investment vehicle itself. The naming of heirs in a will or trust will not override these beneficiary designations. Estate planning documents have their own requirements and nuances, and to help ensure that desires are met it may be beneficial for an attorney with experience in these matters to review the documents in order to determine if they are valid under state law. In the case of an IRA, it is also necessary to make sure that its custodian will allow beneficiaries to take full advantage of stretched distributions.