The stretch IRA is a simple way to pass wealth to the next generation. However, it may soon disappear.
An IRA is known as a retirement tool but it is also an estate planning tool. This is especially true with a stretch IRA, where the beneficiary of the account can delay taking out required minimum distributions and save a lot on taxes. However, that benefit is now coming under fire, according to Kiplinger in "Death of 'Stretch' IRAs Would Mean Loss of Flexibility for Beneficiaries."
Congress is considering doing away with the ability to stretch IRAs for non-spouse beneficiaries, if the accounts hold more than $450,000.
This proposal has passed in the Senate Finance Committee, since it is expected to raise federal revenue by a substantial amount. If this passes and becomes law, then estate plans will need to be revisited.
This idea is not yet currently law.
However, people who use IRAs as an important part of their estate plans would be advised to keep an eye on this issue and to start thinking about alternatives for their estate plans.
Reference: Kiplinger (August, 2017) "Death of 'Stretch' IRAs Would Mean Loss of Flexibility for Beneficiaries."