[{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.amorusolaw.com\/blog\/secure-act-has-changed-special-needs-planning-greenwich-ct-new-york-ny\/#BlogPosting","mainEntityOfPage":"https:\/\/www.amorusolaw.com\/blog\/secure-act-has-changed-special-needs-planning-greenwich-ct-new-york-ny\/","headline":"SECURE Act has Changed Special Needs Planning","name":"SECURE Act has Changed Special Needs Planning","description":"\u201cAn applicable multi-beneficiary trust can solve some–but not all–of the challenges that the new act presents.\u201d The SECURE Act eliminated the life expectancy payout for inherited IRAs for most people, but it also preserved the life expectancy option for five classes of eligible beneficiaries, referred to as \u201cEDBs\u201d in a recent article from Morningstar.com titled […]","datePublished":"2021-01-13","dateModified":"2024-08-07","author":{"@type":"Person","@id":"https:\/\/www.amorusolaw.com\/blog\/author\/amorusolaw\/#Person","name":"Amoruso & Amoruso, LLP","url":"https:\/\/www.amorusolaw.com\/blog\/author\/amorusolaw\/","identifier":5,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/12de032c04195e9c39a06a6d6eea182f7b4fa655c20e245f8094a244b5cdd0cb?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/12de032c04195e9c39a06a6d6eea182f7b4fa655c20e245f8094a244b5cdd0cb?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"Amoruso & Amoruso, LLP","logo":{"@type":"ImageObject","@id":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/07\/amoruso-logo.svg","url":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/07\/amoruso-logo.svg","width":0,"height":0}},"image":{"@type":"ImageObject","@id":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/04\/6a01901dd0a082970b0278800c95fe.jpg","url":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/04\/6a01901dd0a082970b0278800c95fe.jpg","height":398,"width":600},"url":"https:\/\/www.amorusolaw.com\/blog\/secure-act-has-changed-special-needs-planning-greenwich-ct-new-york-ny\/","about":["Beneficiary","Disabled","Estate Planning","Medicaid","SECURE Act","Special Needs Planning","Supplemental Needs Trust","Trustee"],"wordCount":644,"keywords":["Beneficiary","Disabled","Estate Planning","Medicaid","SECURE Act","SNT","Special Needs","Supplemental Needs Trust","Trustee"],"articleBody":"\u201cAn applicable multi-beneficiary trust can solve some–but not all–of the challenges that the new act presents.\u201dThe SECURE Act eliminated the life expectancy payout for inherited IRAs for most people, but it also preserved the life expectancy option for five classes of eligible beneficiaries, referred to as \u201cEDBs\u201d in a recent article from Morningstar.com titled “Providing for Disabled Beneficiaries After the SECURE Act“. Two categories that are considered EDBs are disabled individuals and chronically ill individuals. Estate planning needs to be structured to take advantage of this option.The first step is to determine if the individual would be considered disabled or chronically ill within the specific definition of the SECURE Act, which uses almost the same definition as that used by the Social Security Administration to determine eligibility for SS disability benefits.A person is deemed to be \u201cchronically ill\u201d if they are unable to perform at least two activities of daily living or if they require substantial supervision because of cognitive impairment. A licensed healthcare practitioner certifies this status, typically used when a person enters a nursing home and files a long-term health insurance claim.However, if the disabled or ill person receives any kind of medical care, subsidized housing or benefits under Medicaid or any government programs that are means-tested, an inheritance will disqualify them from receiving these benefits. They will typically need to spend down the inheritance (or have a court authorized trust created to hold the inheritance), which is likely not what the IRA owner had in mind.Typically, a family member wishing to leave an inheritance to a disabled person leaves the inheritance to a Supplemental Needs Trust or SNT. This allows the individual to continue to receive benefits but can pay for things not covered by the programs, like eyeglasses, dental care, or vacations. However, does the SNT receive the same life expectancy payout treatment as an IRA?Thanks to a special provision in the SECURE Act that applies only to the disabled and the chronically ill, a SNT that pays nothing to anyone other than the EDB can use the life expectancy payout. The SECURE Act calls this trust an \u201cApplicable Multi-Beneficiary Trust,\u201d or AMBT.For other types of EDB, like a surviving spouse, the individual must be named either as the sole beneficiary or, if a trust is used, must be the sole beneficiary of a conduit trust to qualify for the life expectancy payout. Under a conduit trust, all distributions from the inherited IRA or other retirement plan must be paid out to the individual more or less as received during their lifetime. However, the SECURE Act removes that requirement for trusts created for the disabled or chronically ill.However, not all of the SECURE Act\u2019s impact on special needs planning is smooth sailing. The AMBT must provide that nothing may be paid from the trust to anyone but the disabled individual while they are living. What if the required minimum distribution from the inheritance is higher than what the beneficiary needs for any given year? Let\u2019s say the trustee must withdraw an RMD of $60,000, but the disabled person\u2019s needs are only $20,000? The trust is left with $40,000 of gross income, and there is nowhere for the balance of the gross income to go.In the past, SNTs included a provision that allowed the trustee to pass excess income to other family members and deduct the amount as distributable net income, shifting the tax liability to family members who might be in a lower tax bracket than the trust.Special Needs Planning under the SECURE Act has raised this and other issues, which can be addressed by an experienced estate planning attorney.Reference: Morningstar.com (Dec. 9, 2020) “Providing for Disabled Beneficiaries After the SECURE Act”For more information on elder law and estate planning, please visit my estate planning website."},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Blog","item":"https:\/\/www.amorusolaw.com\/blog\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"SECURE Act has Changed Special Needs Planning","item":"https:\/\/www.amorusolaw.com\/blog\/secure-act-has-changed-special-needs-planning-greenwich-ct-new-york-ny\/#breadcrumbitem"}]}]