Is a Veteran with Disability an Eligible Designated Beneficiary
Client who is actively taking RMD’s has passed and the son is rated by the Veterans Administration at greater than 50% disabled. The son has been receiving VA $$ monthly and indicates that they will continue. Do IRS rules speak specifically to VA disability and is the son eligible for the Stretch IRA?
Permalink Submitted by Alan - IRA critic on Thu, 2024-09-05 18:23
There is no specific mention of VA eligibility ratings. If the son was not receiving SSD benefits, the only documentation acceptable in an IRS audit would be a letter from his MD indicating that son met the requirements of Sec 72(m)(7) at the time of father’s death.
Note that such evidence or documentation no longer has to be provided to the IRA custodian per the recent Secure Act final Regs, so the custodian won’t care if the son treats himself as an EDB and takes stretch distributions. Son is on the honor system. The chance of an IRS audit is very slim, but just in case it would be a good idea for the son to gather any available documentation ASAP from his MD and retain it.
Permalink Submitted by Jim Moran on Sat, 2024-09-07 18:05
What IRS Publication do I go into to find the Section that you have referenced in your answer.
Thank you….
Permalink Submitted by Alan - IRA critic on Sun, 2024-09-08 09:40
Sec 72(m)(7) is copied below:
“72(m)(7)Meaning of disabled
For purposes of this section, an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary may require.”