Special Needs trust as beneficiary–RMD question
Our client passed away at age 78. The beneficiary of her IRA was her revocable living trust. There are 2 beneficiaries of the revocable living trust. One is her 55 year old son and the other beneficiary is a special needs trust for her other son. The custodian will look through the trust so that a BDA-IRA can be set up for her 55 year old son and the special needs trust.
Our question is regarding the RMDs on the special needs trust…will the inherited IRA have to be distributed in a certain period of time or can it be stretched over the life of the beneficiary.
thanks!
Permalink Submitted by Alan - IRA critic on Mon, 2015-02-23 19:56
Did the IRA beneficiary designation just list the RLT, or did it specifically name the SNT as well?
Permalink Submitted by Barbara Kong on Tue, 2015-02-24 00:48
It just listed the revocable trust. No mention was made of the special needs trust
Permalink Submitted by Alan - IRA critic on Tue, 2015-02-24 01:13
Then assuming that the SNT is qualified, since separate account rules do not apply to trusts (the RLT), the age of the oldest beneficiary of the SNT as well as the age of the 55 year old must be used for RMDs to the SNT as well as RMDs to the 55 year old son. Worst case scenario would be one of these trusts does not meet qualification requirements or the trustees do not provide trust info to the custodian by the 10/31 deadline, then the RMDs would have to be based on the remaining life expectancy of the client which would drain the IRA in 11+ years from the year of death.