You might contribute to your IRA for decades to help pay for your retirement. But if you don’t need all the money, you may want to leave what’s left to your children or grandchildren. However, if you want to ensure they get the most from this inheritance, you’ll need to do some planning.
Here’s a little background: Up until a couple of years ago, when you left the proceeds of your IRA to your beneficiaries, they could choose to “stretch” required withdrawals over a long period, based on their life expectancies. These required withdrawals were generally taxable, so this “stretch IRA” allowed your beneficiaries to greatly reduce the annual taxes due, while benefiting from longer tax-deferred growth potential. And the younger the beneficiary, the longer the life expectancy and the lower the withdrawals, so this technique would have been especially valuable for your grandchildren or even great-grandchildren.