Special Needs Trust as IRA Beneficiary
I have a client couple with well over $1 million each in IRAs
Both have the spouse as primary beneficiary.
The contingent beneficiaries are 50% daughter and 50% to son’s special needs trust. Both are in their mid 20’s and healthy.
What language do I need to look for, to make sure that it will qualify for the stretch?
The trust is one of those really long ones (59 pages) that is hard to follow in practice.
Jan Sleeter
Permalink Submitted by Alan - IRA critic on Mon, 2015-01-12 18:49
You indicated that the son is healthy, but there must be some deficiency for them to have established an SNT. An SNT has the same requirements as any other trust to be considered qualified for look through treatment, including the notification deadline to the custodian. If the surviving spouse disclaims or pre deceases, the daughter and SNT trustee must be sure to establish separate inherited IRA accounts by the deadline. If the SNT is not qualified for any reason including missing the notification deadline, it will be treated as a non individual beneficiary and that could ruin the stretch for the SNT. The daughter can avoid this pitfall if she establishes a separate inherited IRA account by the end of the year after spouse’s death. If there is any concern about the daughter’s stretch, perhaps separate IRAs with different contingent beneficiaries should be established.
Permalink Submitted by Bruce Steiner on Mon, 2015-01-12 23:41