Beneficiary IRA/Special Needs Trust
Here is the situation. We have a client that was a direct beneficiary named on an IRA. The family and this individual agreed to a conservatorship as they are bipolar to protect his assets. The conservator is supposed to corral all the assets and get them into the Special Needs Trust. A few questions.
1. Is their anyway to claim the IRA as a beneficiary IRA, still preserve the 10 year payout rule and have the ownership controlled by the SNT.
2. There is also an NQ annuity with significant gain in it that is the same situation. Is their anyway to preserve the NQ beneficiary stretch with control by the SNT.
We were going to petition the court that all distributions from the Bene IRA and the NQ annuity would be required to go to the SNT, but are trying to see if there is a different way to accomplish this. They are closing the conservatorship as soon as they can get all the assets in the correct place. Thanks for your help.
Permalink Submitted by Alan - IRA critic on Thu, 2021-02-04 20:11
Beneficiary inherited an IRA in 2020. Any chance the beneficiary would qualify as disabled or chronically ill on the date of death? If so, the beneficiary would be “eligible” for the life expectancy stretch instead of the 10 year rule.
Does beneficiary qualify for an SNT in state of residence? If so, it is possible to create a “self settled trust” aka (d)(4)(A) as approved by the IRS in PLR 2006 20025 and 2011 16005, and transfer the inherited IRA into the SNT as a non taxable transfer. These have mostly been done to preserve govt benefits in the past, and doing this might be challenging in certain states. An experienced trust attorney in this area should be sought out. Not sure if the annuity could follow the same path.
For the IRA, the RMD distribution period will not be affected by the transfer, if it happens. Whether the 10 year rule or LE applies is determined as indicated above without regard to the trust provisions.