Structuring Special Needs Trusts as IRA Beneficiaries: Avoiding Tax Traps in Funding SNTs With Retirement Accounts

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Wednesday, May 3, 2017
Recorded event now available


This CLE/CPE webinar will provide estate planners with an advanced guide to drafting and structuring supplemental needs trusts and special needs trusts (SNTs), focusing on special considerations such as setting up trusts to serve as beneficiaries of retirement accounts, key drafting language, and traps to avoid in structuring third-party SNTs as well as first-party SNTs.

Description

A critical step in establishing an SNT is determining how to fund the trust. Taxpayers may use a number of assets, including IRAs, to fund a SNT. There are, however, a number of critical issues that estate planners must navigate to ensure that the trust is structured to preserve public benefits and to provide for the special needs beneficiary in a tax-efficient manner.

Key to successfully drafting an SNT funded by retirement accounts is to make sure the trust document is drafted to base the retirement distributions on the life of the beneficiary. Also critical is ensuring that any remainder beneficiaries of the SNT do not trigger any accelerated distribution rules, which could have negative income tax consequences. Planners must be mindful of the conduit rules when designating additional beneficiaries of the trust.

Estate planners also have the option of utilizing ABLE accounts in conjunction with, or as an alternative to, SNTs. In structuring an estate plan to provide for a beneficiary with special needs, counsel must be mindful of contribution and funding rules, as well as the impact of the trust structure on future public benefits.

Listen as our panel provides a detailed and practical guide to structuring SNTs funded by retirement accounts. The panel will discuss how to properly structure trust documents to avoid unwanted tax traps, including sample language and beneficiary structures.

Outline

  1. Evaluating SNT structures (first-party vs. third-party)
  2. Drafting practices for SNTs
  3. Funding the trust
  4. Special considerations when using retirement accounts to fund SNTs
  5. See-through provisions unique to SNTs
  6. Illustrations and sample language

Benefits

The panel will review these and other key issues:

  • How to structure beneficiary designations within the conduit trust rules
  • Funding options and requirements of IRAs and other retirement accounts
  • Avoiding the “five-year rule”
  • Integrating ABLE accounts with SNTs
  • Pre-trust strategies

Learning Objectives

After completing this course, you will be able to:

  • Identify the tax traps present in structuring an SNT that could result in unnecessary income tax consequences
  • Decide from among various options for funding SNTs
  • Recognize scenarios for combining SNTs with ABLE accounts
  • Discern critical terms that must be present in structuring an SNT funded by an IRA

Faculty

Elizabeth L. Gray, Principal
McCandlish Lillard, Fairfax, Va.

Ms. Gray has been practicing law since 1996 and is certified as an Elder Law Attorney by the National Elder Law Foundation (NELF). She focuses her practice in the areas of estate planning, elder law, special needs planning, guardianships, and the administration of estates. Her work includes the drafting of trusts (including special needs trusts, pet trusts, trusts to minimize income taxes and capital gains), wills, powers of attorney, medical powers of attorney, and other succession planning documents.

Scott K. Tippett, Atty
The Tippett Law Firm, Oak Ridge, N.C.

Mr. Tippett's practice focuses on wealth law, as a comprehensive and integrated approach to domestic and international estate planning, asset protection planning, business matters, and tax issues. He is the principal author of The North Carolina Wealth Law Counselor and The Wealth Lawyer, informative blogs dedicated to wealth law, estate planning, and asset protection planning issues.


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