Stretch IRA with Special Needs trust

Submitted by Michael Pastore on Mon, 2016-06-13 16:34

Hello,

This is my first time posting on this forum. I apologize for any *newbie* type mistakes with the post.

My father recently passed away and he had a traditional 401K and IRAs as well.
We had setup multiple beneficiaries on the 401K/IRAs prior to his passing.

I would like to setup multiple accounts for each of the beneficiaries to take advantage of the Stretch IRA
and can name each account:

Father’s Name (deceased, 05/01/2016) fbo BeneficiaryName

However, I have a sister who is handicapped, and has a special needs trust setup in the will.
Can I specify the special needs trust on one of these accounts?
How should the account be named?
Anything additional required because of the special needs trust?

Thank you in advance for any assistance!



Submitted by Bruce Steiner on Tue, 2016-06-14 02:06

  • The IRA owner should have left the daughter’s share to her in trust rather than outright.
  • While not as good as if the IRA owner had done so (since a trust created by someone other than the beneficiary isn’t subject to Medicaid payback), there have been a few private letter rulings allowing a beneficiary of an inherited IRA to contribute the inherited IRA to a special needs trust for her own benefit.  While the rulings don’t discuss this, presumably they were payback trusts in which Medicaid gets paid back upon the beneficiary’s death.


Submitted by Michael Pastore on Tue, 2016-06-14 02:38

Thank you for your response.  He did I believe.  He left a percentage of his Residuary Estate to the Trustee of the Named Sister Special Needs Trust, dated the same date as the will and executed prior to the will.  I was trying to understand when the traditional 401K or Traditional IRA is being split into separate accounts for the stretch IRA, would the trust have to have been listed as a beneficiary on the 401K and the IRA, and if it was not is it possible to still do the stretch IRA for the rest of us, and can an account be setup for the trust even if it was not setup as a beneficiary on the IRA/401K?  If so, how would it be named?  Can the rest of us not have separate accounts setup because the trust was not defined as a beneficiary on the 401K/IRA even though it has a share of the Residuary Estate?  Thank you for your help.



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