Chronic Illness under Secure Act

Submitted by David Mitchell on Thu, 2023-10-26 12:50

Does a documented history of drug and alcohol abuse count as a chronic illness that would allow a trust to stretch distributions over a longer than 10 years?



Submitted by Alan - IRA critic on Thu, 2023-10-26 15:14

  • Possibly, but there are multiple requirements. The trust must be qualified for look through, and the beneficiary must meet the following chronically ill definition:
  • “An individual is chronically ill if the individual is chronically ill within the definition of section 7702B(c)(2) [of the Internal Revenue Code] and satisfies the documentation requirements of paragraph (e)(7) of this paragraph. However, for purposes of the preceding sentence, an individual will be treated as chronically ill under section 7702B(c)(2)(A)(i) only if there is a certification from a licensed health care practitioner (as that term is defined in section 7702B(c)(4)) that, as of the date of the certification, the individual is unable to perform (without substantial assistance from another individual) at least 2 activities of daily living for an indefinite period which is reasonably expected to be lengthy in nature (and not merely for 90 days).” Prop. Reg. § 1.401(a)(9)-4(e)(5).
  • The applicable date of this determination is the date of death of the plan owner with a documentation deadline.
  •  “It is not enough for the beneficiary to merely be disabled or chronically ill (D/CI) as of the participant’s death. To qualify as an EDB, the D/CI beneficiary must also supply “documentation” to the “plan administrator” by a certain deadline: “(7) Documentation requirements for disabled or chronically ill individuals. This paragraph (e)(7) is satisfied with respect to an individual described in paragraph (e)(1)(iii) [disabled] or (iv) [chronically ill] of this section if documentation of the disability or chronic illness described in paragraph (e)(4) or (5) of this section, respectively, is provided to the plan administrator no later than October 31 of the calendar year following the calendar year of the employee’s death. For individuals described in paragraph (e)(1)(iv) of this section, the documentation must include a certification from a licensed health care practitioner (as that term is defined in section 7702B(c)(4)).” Prop. Reg. § 1.401(a)(9)-4(e)(7).
  • There are two types of applicable multi beneficiary trusts, which in this case would replicate a supplemental needs trust. This is too complicated to explain in this forum.

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