Special Needs Trust as IRA beneficiary

Submitted by Stephen Csenge on Wed, 2016-01-27 18:36

Clients dad passed away and the IRA beneficiaries are the two sons and the daughter’s special needs trust. We would like to do inherited “stretch” IRA’s for all three. How would the inherited IRA to the Special Needs Trust be titled and what is the process for annual RMD’s? Is it paid to the Special Needs Trust each year? Does it need to be withdrawn for the Trust afterwards?



Submitted by Bruce Steiner on Wed, 2016-01-27 19:55

  • The financial institution will have its preferred style, showing the names of the trust, the trustees, and the deceased IRA owner.

 

  • The trustees will take the required distributions (or more, if they choose) from the IRA each year and deposit them into a taxable account in the name of the trust (or, more precisely, in their names as trustees of the trust).

 

  • The trustees will make distributions to the beneficiaries as permitted or required by the terms of the trust.

 

  • Bruce Steiner, author of “Trusts as Beneficiaries of Retirement Benefits”:  http://www.elderlawanswers.com/Documents/Trusts%20as%20Beneficiaries%20of%20Retirement%20Benefits.pdf 

Submitted by Alan - IRA critic on Wed, 2016-01-27 20:29

All beneficiaries should be sure to transfer their share into separate inherited IRA accounts no later than 12/31 of the year following the year of dad’s death. That will enable each beneficiary to use their own life expectancy for RMDs and will simplify reporting and accounting. It will also eliminate risks of loss of the stretch to the two individuals in the event that the trust lacks qualification due to some shortcoming. 

Submitted by Stephen Csenge on Thu, 2016-01-28 15:49

As always, thank you very much

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