RMD affect Special Needs Trust
We have a Special Needs Trust set up for our 34 yr old son. We also have a large sum of $$ in Traditional IRA’s. If we were to pass the IRA’s goes into his Trust. Does he need to take RMD’s over next 10 years? If so he would exceed the Medicaid $2,000 max rule and lose his Medical and other benefits.
Are there any other options besides converting the IRA’s now and pay the tax while we are alive?
Tom
Permalink Submitted by Alan - IRA critic on Tue, 2024-02-13 02:44
Since the son is presumably disabled or chronically ill, as the beneficiary of an SNT he would be treated as an eligible designated beneficiary (EDB) which allow RMDs to be calculated over his life expectancy starting with the year after the year the SNT inherits your IRA. Under the Secure Act changes, you could even name a charity as the successor beneficiary of the SNT and the stretch will still apply while your son lives. Finally, if the SNT is drafted correctly, any distributions passed through to your son should not disqualify him from govt benefits such as Medicaid. You may want to have the SNT reviewed in wake of the Secure Act changes. Finally, you need to sure that a competent trustee is named for the SNT.