Special Needs Trust as IRA Beneficiary
If a Special Needs Trust is named as an IRA beneficiary, are the proceeds of the IRA taxed when passed to the Trust?
If a Special Needs Trust is named as an IRA beneficiary, are the proceeds of the IRA taxed when passed to the Trust?
Permalink Submitted by Alan Spross on Tue, 2007-09-04 18:46
Yes, when distributed from the IRA to the trust. But if the trust is qualified for look through treatment, the beneficiary’s single life expectancy can be used for the RMDs. This provides considerable tax deferral, but that advantage is partially offset by the higher trust tax rates.
For more information see PLR 2006 20025
Permalink Submitted by Al Fry on Tue, 2007-09-04 20:45
Unless the SNT is a Grantor trust, in which case the income would be taxed to the child. The USUAL clue is the chold’s SSN used instead of a TIN.