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Don’t Make Me Say I Told You So 265

► To allow their children and grandchildren to pursue
a life that may not place making money as the main

goal. Leaving money to children and grandchildren may
allow them to pursue a career that they love, but is not

necessarily extremely lucrative.

Here are a few ways that may allow you to leave a substantial

amount of money to your children and grandchildren:

Stretch IRA – If there is no need for the income from an IRA

account’s required minimum distributions (RMDs), then naming
children as primary beneficiaries allows a smaller withdrawal

from the IRA each year. This smaller RMD is due to the children’s
longer life expectancy, which makes the divisor used to

calculate the RMD much larger; hence, a smaller amount of
money needs to be withdrawn. Naming grandchildren, or even

great-grandchildren, may allow you to stretch out the IRA over
generations.

To protect a spouse when using a stretch IRA, consider buying
life insurance on the IRA-owner. You might use money from

RMDs to buy life insurance equal to the value of the IRA. Money
from the life insurance would go to the IRA-owner’s spouse if

the IRA-owner passed away.

Chapter 6: Your Action Plan