Stretch IRA
My wife and I are in our seventies and would like clarification on the Stretch aspect as it may apply to both our children. Our son is 56 years old, on Social Security Disability, he suffers from Crohn’s Disease and is unable to work. Our daughter is 54 years and has Type I Diabetes. She works as a RN and is able, at this time, to manage her diabetes .
Under the Secure Act do they qualify as EDBs as defined under- “Disabled & Chronically Ill”? What steps should we take to ensure, after our death, that they will not face a complicated process to qualify . Is there certification methods under the law to complete prior to our deaths? Should it be part of the Beneficiary process stated in the IRA Documents?
To your knowledge has the IRS established regulations to help ?
Permalink Submitted by Alan - IRA critic on Tue, 2021-04-20 16:12
The IRS has not yet issued Regs for the Secure Act. As it appears now, your son would qualify as an EDB, but daughter would not. The final determination is made on the date of death of the spouse from which the children would inherit. At that time, they should establish separate inherited IRA accounts and your son could use his remaining life expectancy to calculate his RMD – same as before. Also, at that time I would recommend that he secure a written statement from his MD that he is disabled per Sec 72(m)(7) of the tax code. Typically, SSD would not be questioned as a qualifier, but by that time he may be off SSD and on regular SS benefits if the death occurs after his normal retirement age. Daughter would be subject to the 10 year rule unless her diabetes deteriorates to a later stage by the time she inherits. If the amount of the IRA the son will inherit is substantial enough, you might consider leaving the IRA to a special needs trust established for him. The RMDs would then not jeopardize govt benefits, and the remaining balance of the IRA or trust at his death could be inherited by his beneficiary instead of being used to reimburse the govt for benefits paid.