... A decade ago, after providing for his wife and two children, Mr. Folk decided to extend the life of his savings by arranging for his four grandchildren to inherit individual retirement accounts, or IRAs, each worth more than $1 million.
Mr. Folk made this move because when young people inherit either a traditional IRA or a Roth IRA, the accounts can benefit from decades of tax-free compounding after the original IRA owner dies. That’s why they’re called Stretch IRAs.
Mr. Folk says he paid well over $1 million of tax to carry out his plans by converting the accounts for his grandchildren, ages 10 to 14, from traditional IRAs to Roth IRAs. That way, he wouldn’t have to take withdrawals while alive, and his grandchildren’s required payouts could be tax-free.
Now Congress may throw a wrench in Mr. Folk’s planning. The House of Representatives has passed a bill reducing Stretch IRAs to a maximum of 10 years for heirs like Mr. Folk’s grandchildren. ...
“IRAs are for retirement security. They are not wealth succession management tools, and I think we’ve now got the policy right,” Rep. Brady said in late August. ...