Thought for the Day” #1247 – by Stephen R. Elville, J.D., LL.M.

May 15, 2019

There are several ways of dealing with the problems associated with ensuring proper retirement plan beneficiary designation to a disabled person with special needs. The easiest way is to avoid “class” designations by specifically naming the beneficiaries of the retirement account and not including a relative with special needs as a beneficiary. The obvious drawback of this strategy, especially when the retirement account makes up the majority of a family’s net worth, is that the child with special needs loses his or her inheritance. A better option for families who want to leave a share of a retirement account to a person with special needs is to create a special needs trust and name it as a designated beneficiary. If properly drafted, the special needs trust can receive the retirement funds without negative income tax implications, and the funds will assist the person with special needs without compromising his or her benefits. If the family has other assets outside of the retirement plan, it may make sense to fund the special needs trust with those assets while leaving the retirement plan to other beneficiaries. #elvilleeducation