The Makofsky Minute - Planning for Disabled and Chronically Ill Individuals Under the Secure Act - Makofsky Valente Law Group, P.C.
Planning for Disabled and Chronically Ill Individuals Under the Secure Act

This year’s passage of the SECURE Act brought with it a huge change in the law that can benefit loved ones who are disabled or chronically ill. The SECURE Act carved out special considerations with regard to inheriting retirement accounts for those beneficiaries who are classified as disabled or chronically ill.

Prior to the passage of the SECURE Act, retirement accounts could be left to beneficiaries and no matter who the beneficiary was the beneficiary could stretch the RMDs over their own life expectancy.  This allowed for compounded tax-free growth and great wealth transfer to future generations of your beneficiaries.  The SECURE Act drastically decreased which individuals would be eligible to stretch distributions over their life expectancy.  Beneficiaries who are now not entitled to a stretch must withdraw the funds within either 5 or 10 years, which doesn’t allow for those funds to keep growing.  But under the new rules of the SECURE Act, individuals who are disabled or chronically ill are still entitled to stretch the RMDs over their own life expectancies.

In order to take advantage of this new law for the benefit of your disabled or chronically ill loved ones, you can create a special Supplemental Needs Trust with specific provisions allowing the beneficiary to utilize the stretch benefit.

  • The trust allows retirement account benefits to receive a maximum stretch under the law.  This means that the beneficiary can stretch the distributions from that retirement account over their life expectancy. This allows those funds in the retirement account to keep accumulating and growing.
  • The trust will allow the beneficiary to benefit from the retirement account proceeds while still being eligible for public benefits, such as Medicaid or Supplemental Security Income.

If you have a loved one who is disabled or chronically ill and you plan on making them a beneficiary of a retirement account, let us help you make the most of your money in light of the new SECURE Act.  Give us a call if you would like us to put a plan in place for you!