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Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2439
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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Several years ago, my estate lawyer set up a special needs

Customer Question

Several years ago, my estate lawyer set up a special needs trust for my daughter. At the time, my lawyer advised me to change all of my beneficiaries to "the Estate of Paula Schram," as my daughter cannot inherit anything directly. The special needs trust does not go into effect until my death. When I asked my lawyer if I could make the special needs trust the beneficiary for my annuities, now &/or, when I annuitize, she said that annuity beneficiary laws were very complicated, and are changing. She suggested that I speak to an accountant. When I asked you about it a year ago, you said that new regulations would be released by the end of the year 2015. Another lawyer told me that it might be possible for the beneficiary to be the special needs trust, "which is to be created on my death." My lawyer also told me that there are different types of annuities, and allowable beneficiaries may depend on what type they are. I have had an IRA variable annuity since 2003. Because I turned 70 last June, I will most likely start annuitizing in April 2017, rather than take the Required Minimum Distribution. When I annuitize that account, it will be fully taxable. The other annuity that I have is a non-IRA that I obtained in Sept. 2015. I do not plan to annuitize that account for several years. Last year, I also obtained a Single Premium life insurance policy.
Tax-wise, would it be more beneficial for my estate to be my beneficiary, or the special needs trust, if allowable, for these accounts?
Thank you so much for your attention to these matters.
Submitted: 12 months ago.
Category: Tax
Expert:  Rick Martin replied 12 months ago.

Hi, this is Rick. I'm a CPA with 25 years experience. I also have a special needs trust myself. The answer to your question is, "it depends". Please let me suggest that for a topic like this we discuss it over the phone so we don't miss anything.

Customer: replied 12 months ago.
I would like to have the answer in writing; therefore please feel free and answer my question using this source.
Expert:  Rick Martin replied 12 months ago.

Hi Lidia, as there are many factors to consider, a little back and forth discussion may be needed. I'm going to opt out and let another expert try and respond to your question. You may wish to add to you question what it is you are trying to accomplish, as there are advantages and disadvantages of different payment approaches. Take care. -Rick

Customer: replied 11 months ago.
Still waiting for answer.
Question forwarded to you on 10/25/2016??????????????????
Expert:  Anne replied 11 months ago.

Hi Lidia

I apologize for the delay.

There are pros and cons of any decision you make re: who you choose to be your beneficiary.

If you name your estate as your beneficiary, the IRS requires that the pre-tax retirement accounts pay within 5 years if you have not reached age 70 1/2. Since you have reached the age of 70 1/2 (or will soon)If the default rule is the remainder of the owner’s own life expectancy (using a different “One-Life” table rather than the “Uniform” table). Please see below:

Although the trustee can decide to pay out or to retain in trust any IRA distributions the trustee receives, the tax on any traditional IRA or 401K money would still have to be paid by the trust.

Here is the best information I have found on the web, and I have answered your question using this website, years of practicing, and the IRS web site.......still, this is the best I have found.

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Expert:  Anne replied 11 months ago.

Well, aren't I embarrassed now......and well I should I tell you that there's a good web site, and forget to send you the it is: