The tax-deferred growth of a traditional IRA and the tax free growth of a Roth IRA are very valuable. The client can take maximum advantage of these tax shelters by doing an Extended IRA.

There are two phases in using the Extended IRA technique:

The owner takes only minimum distributions during life. If the account is a Roth, there is no need to take any distributions at all.

When the owner dies, the beneficiaries take only the minimum distribution required.

By taking only the minimum, more funds stay inside the account to grow tax deferred or tax free.

Since each beneficiary's minimum distribution is based on the life expectancy, your clients will make the most effective stretch if a young beneficiary (such as a child or grandchild) is used. The younger the beneficiary, the longer the life expectancy and the smaller the distribution each year. For example, a stretch over a great-grandchild's life provides more tax deferral than the stretch over a child's life.

If an owner named several beneficiaries, they can split the contract after the owner's death so that each beneficiary has his or her own share. Then each can take minimum distributions using their own life expectancy. This provides a longer stretch to younger beneficiaries.

Extending the IRA is the most beneficial to an owner who does not need the income from the IRA and has no plans to withdraw assets (except for the Minimum Required Distributions from a traditional IRA after age 70½). Also, the income needs of the spouse are of primary importance in choosing a beneficiary. The beneficiary, after all, will not just be a measuring life. Your client should also consider the estate tax and generation-skipping transfer tax implications in choosing beneficiaries.