Special Needs Trust
I have seen discussions on this board as well as found a PLR that allows a client to more an Inherited IRA into a Special Needs Trust, so I know that is possible. Is there a way for someone who becomes incompacitated to move those IRA assets into a Special Needs Trust. From what I have read, a Special Needs Trust will avoid medicaid recovery and the IRA assets will not have to be spent down to qualify for SSDI. Has anyone ever encountered this situation? Maybe a Special Needs Trust is the wrong way to go, but our intent if it can be done is to not have to fully liquidate the IRA just to satisfy SSDI or Medicaid rules.
Permalink Submitted by Alan Spross on Fri, 2011-01-14 02:53
PLR 2006-20025 appears to do what you intend, when the SNT is self settled as per this link as a (d)(4)(a) trust. Note that the state becomes the successor beneficiary:
http://advisor.morningstar.com/articles/fcarticle.asp?s=&docId=12631&pgNo=1
Permalink Submitted by Bruce Lancia on Fri, 2011-01-14 14:02
Unfortunately that PLR pertains to someone that is receiving an Inherited IRA, the type of IRA I am speaking of is a IRA Rollover from a WRP that occurred due to a QDRO court order as a part of a divorce. So the IRA is in the name of the person also needing the special needs trust. We were trying to avoid liquidating the IRA first, spending through the funds. It appears that there isn’t any clear IRS code that allows a current IRA owner to move money into a Special Needs Trust. I guess custodian’s must not have a tracking system to let the IRS know that soc sec number 1 is the same as trust tax id number 2 for tax reporting purposes. I do fail to see the difference between a beneficiary IRA and what we want to due. Thanks
Permalink Submitted by Bruce Steiner on Sat, 2011-01-15 23:12
There is no authority permitting an IRA owner (as opposed to a beneficiary after the death of the IRA owner) to do this. The reason may be that (except upon divorce) an IRA owner can’t transfer the IRA without its losing its character of an IRA.