Disabled Beneficiary of IRA pre SECURE ACT and pre RBD
Disabled individual is named the beneficiary of an IRA of her deceased brother even though she has a 3rd pty SNT. He passed in 2019 at the age of 49. Once the account was converted to a beneficiary IRA in her name, would this trigger the loss of her social benefits? Can the trust be made the owner of the bene IRA to avoid this? Would RMD’s begin based on her DOB of her dec’d brother’s DOB? Can the RMD’s be stretched out over her lifetime? Can the SNT be the recipient of the RMD’s or would they need to be payable to her?
Permalink Submitted by Alan - IRA critic on Mon, 2025-03-03 13:11
Obviously, the brother should have named the SNT as IRA beneficiary. While the RMDs would have been the same (based on single LE of disabled beneficiary), a properly drafted 3rd party SNT beneficiary reflecting state rules would have avoided means testing for govt benefits. And a 3rd party SNT would have additionally prevented claw back of those benefits upon the disabled persons death. A self settled SNT (1st party) will not.
As a direct beneficiary, RMDs should have started in 2021. Were the RMDs overlooked, and if not what happened to any govt benefits such as Medicaid?
Not sure that it is possible to transfer this inherited IRA into a self settled SNT at this point. A local trust attorney well versed in this area should be consulted and estimated fees determined and considered in relation to the IRA value. If no beneficiary RMDs have been taken to date, the RMDs will have to be calculated and distributed to the SNT or the beneficiary and a 5329 filed for each year to request that the penalty be waived.