The Power of a Multi-Generational Strategy

Your clients may not understand the power of a Multi-Generational IRA strategy so it’s important that you, the advisor, not only fully understand an MGIRA strategy and how it works, but you must be able to effectively explain the MGIRA concept to your clients.

The Multi-Generational IRA (MGIRA) concept has been around since 1999 when the Internal Revenue Service (IRS), in a Private Letter Ruling, stated that a man who inherited his mother’s seven-figure IRA could name his own beneficiaries. Your clients must understand that an MGIRA is not a product; it’s a strategy available to them. MGIRA is a term used in the retirement planning industry to refer to the ability of your clients’ IRA beneficiaries to stretch distributions over their individual life expectancies.  Since the IRS began embracing the concept of stretching distributions, your clients now have the power to create a legacy of income for their children and grandchildren. You can help your clients set up an MGIRA strategy so their loved ones can enjoy the benefit of tax-deferred growth on IRA assets they inherit long after the client passes away, leaving their family members with not only fond memories but a financial legacy.

What if Your Client’s IRA Custodian Does Not Allow an MGIRA Strategy?

An MGIRA strategy may be used for an IRA, 401(k), 403(b) and SEP-IRA funds. The opportunity for your clients’ beneficiaries to “stretch” distributions over their individual life expectancies is available only if the IRA plan document or custodial agreement allows it and specific steps are taken. Many financial service institutions will allow beneficiaries to use an MGIRA distribution strategy but, unfortunately, not all of them do. Your clients’ IRA plan documents will include provisions or language that tells you what their specific distribution options are. The key is to ask the IRA custodian the right questions. If a financial institution does not have the right answers and cannot offer your clients what they want, start a conversation about transferring the IRA to an MGIRA “friendly” custodian that will give your clients what they want to help them reach their retirement planning goals.

Absent an MGIRA, your clients’ beneficiaries could get hit with a huge tax bill that could literally drain every penny and leave their heirs with nothing. Do not assume that legal documents such as wills and trusts will take the place of properly completed beneficiary designations-they will not and they do not. Your clients need more than the average advisor; they need a Retirement Distribution Expert to help them… are you ready?