Crafting Your Legacy: Exploring the Charitable Remainder Trust as a Stretch IRA Alternative- The Stretch IRA was once a popular estate planning tool. Not only could beneficiaries receive inherited IRA funds, but they’d also keep tax benefits. However, recent changes brought about by the SECURE Act have ended this strategy. As a result, those whose retirement plans included a Stretch IRA now need to find an alternative. If you were planning to use a Stretch IRA, Kiplinger makes the case that you should consider a Charitable Remainder Trust (CRT) instead.
A Stretch IRA allowed non-spouse beneficiaries to withdraw slowly from inherited retirement accounts. This minimized taxes, maximized growth and provided long-term security. However, the SECURE Act now requires beneficiaries to empty inherited IRAs within ten years. This increases exposure to taxes and eliminates the Stretch IRA as a long-term option for asset growth and inherited income.
If this change impacts you, there are alternatives available. One of the best options may be the Charitable Remainder Trust, which offers a combination of tax benefits and long-term income.
A Charitable Remainder Trust (CRT) offers a new path to those who want to give long-term income to their beneficiaries. With a CRT, assets are transferred to the trust, providing beneficiaries with a steady income stream for a set period. Once this term ends or the beneficiary dies, any remaining assets are donated to the chosen charity. The benefits of a Charitable Remainder Trust include:
While CRTs provide an alternative to the Stretch IRA, they have limitations. Administration can be complex, and not all asset types are suitable for inclusion in a CRT. Beneficiaries might also receive less total income than other estate planning options. Before you open a CRT, you’ll need to consider whether it’s the right choice for your family.
All estate planning strategies have cases where they’re suitable and cases where they aren’t. Doing right by your family means understanding the options available, weighing them and choosing correctly. Estate planning is complex. However, that’s what we’re here for. Contact our estate planning team to determine if a Charitable Remainder Trust suits you. We’ll walk you through the pros and cons, provide alternatives and help you develop a customized estate plan.
Schedule a consultation today and take the first step toward a legacy that reflects your values and supports your loved ones.
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Crafting Your Legacy: Exploring the Charitable Remainder Trust as a Stretch IRA Alternative
Reference: Kiplinger (April 2024) "Charitable Remainder Trust: The Stretch IRA Alternative | Kiplinger"
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