The stretch IRA takes advantage of the fact that younger beneficiaries have smaller RMDs. With a stretch IRA, account holders name their youngest relatives as beneficiaries. Well-to-do folks who know that their spouses have enough money to get by can preserve and extend their family’s fortune by naming children, grandchildren and
great-grandchildren as IRA beneficiaries. Those younger relatives then take RMDs that are small enough to trigger minimal taxes. The rest of the inherited account can continue to grow tax-deferred and increase in value. It’s a form of inter-generational wealth transfer with serious tax advantages. Not all IRAs can be stretched, so if you’re considering this strategy consult your IRA provider.
If you’re not comfortable bypassing your spouse as your IRA beneficiary you can instruct him or her to stretch for you. With this strategy, you name your spouse as your IRA beneficiary. He or she rolls your IRA into an inherited IRA in his or her name and starts taking RMDs at age 70.5. Your spouse names a member of the younger generation as the IRA’s beneficiary. When your spouse dies, the young beneficiary starts taking the small RMDs described above.
Source:
https://smartasset.com/retirement/what-is-a-stretch-ira