IRA Exception Sought Without Using 72(t)
We have a healthy 52 year old man whose IRA is nearly 100% of his liquid assets. His wife, age 59 has Alzheimers and is unable to work. He plans to care for her and needs to withdraw approximately 5% of the balance for the next several years or so as replacement income. Her medical bills are expected to be low for at least a few years as long as he cares for her. If he is the account holder, can he qualify for the disability exemption on behalf of his wife? Is there any other useful exemption you suggest? Thanks.
Permalink Submitted by Alan Spross on Thu, 2008-06-19 23:10
In order to use the disability exception, the IRA must be in the name of the disabled taxpayer. The medical exception is different and he could use his IRA, but the expenses are subject to the 7.5% floor of their AGI. It appears that the medical exception would not work for him anyway since his need is really disability income. Has she applied for SSD?
If his wife separated from service at 55 or later and has a retirement plan at work, she could get penalty free distributions until she established disability, but you have probably thought of that.
That leaves the 72t plan, which is usually the last option, however in this case it appears to fit quite well. They are not that difficult to set up and administer with reasonable diligence, and 5% fits the general amount that can be accessed under the 72t calculation methods available. The following link provides lots of useful information:
http://72t.net/Default.aspx