Hablamos Español

Should I Use My IRA to Provide for My Special Needs Child?

Should I Use My IRA to Provide for My Special Needs Child | Boca Raton, FL 33431

Parents of a special needs child have different long-term planning concerns. For parents of children with disabilities, a primary concern is ensuring they are provided for now and in the years to come. Naming your child as the beneficiary of your IRA is one option in providing for their future financial needs. However, while this can offer certain advantages, such as the ability to spread out payments, there are also serious disadvantages. Our South Florida Estate Planning Attorneys explain the pros and cons and why, if you have a child with a disability, a Special Needs Trust offers greater protection.

Using An IRA Versus A Special Needs Trust To Provide For A Child With A Disability

Special Needs Planning is a top priority if you have a child with any type of chronic health condition or disability. It provides peace of mind in knowing that they will continue to be provided for regardless of what happens to you. Special Needs Planning includes deciding who will care for your child in the event of your death and designating property and assets that should be distributed to them. These assets are likely to include an IRA, 401(k) plan, or similar retirement benefits.

Pros and Cons Of Naming A Special Needs Child A Beneficiary Of Your IRA

Naming a special needs child as the beneficiary of your IRA seems like a logical choice in Estate Planning. Through the SECURE Act of 2019, Congress has taken some steps to make this easier for parents:

  • Rather than being subject to the standard 10-year time limit, payments to a child with a disability may be stretched out throughout their lifetime.
  • Periodic payments help manage assets and ensure the child has funds to meet future financial needs.
  • Periodic payments offer tax benefits. It allows tax payments to be spread out and can help take advantage of potentially lower future rates.

Unfortunately, there is one major disadvantage of using an IRA to provide for a child with a disability. As it is considered a source of income, it could impact their rights to other important benefits.

A Special Needs Trust Offers Better Protection

A Special Needs Trust (SNT) is an important estate planning tool for parents who have a child with a disability. Referred to also as a supplemental needs trust under Section 732.2025 (8) of the Florida Statutes, it provides many of the same benefits as naming your child a beneficiary of your IRA. However, it also offers better protections:

  • You can still spread out disbursements:
  • It avoids lump sum tax payments;
  • It does not impact your child’s rights to government aid or other benefits.

There are a variety of programs available that help offset the cost of food, shelter, transportation, and medical care for a child with a disability. By not interfering with their eligibility for these benefits, a Special Needs Trust allows you to provide for ‘extras’ that would not otherwise be covered. This helps in ensuring an overall better quality of life.

Request A Complimentary Consultation With Our South Florida Estate Planning Attorney

If you are a parent of a child with a disability and need to provide for a special needs child, it is crucial to take steps now to ensure they are provided for in the years to come. At The Siegel Law Group, P.A., we are here to help.

With nearly 40 years worth of experience handling these types of cases, you can count on us to provide trusted legal guidance in creating a Special Needs Trust and in putting other important estate planning documents in place. To request a complimentary consultation, give us a call or contact South Florida Estate Planning Attorney Barry Siegel online today.

Subscribe to our newsletter

Categories
Medicaid Planning Attorney | Boca Raton, FL | Call 561-955-8515

Now is the time.

Protect yourself and those you love.

At the Siegel Law Group, we help South Florida families, seniors, and their loved ones prepare for the future.

Whether you need to create or update your estate plan, are preparing for long-term care, have a loved one entering or in a nursing home, or need to develop a strategy for your business, we are here to assist you.

Take your first step by contacting us for a complimentary consultation today.

Estate Planning Checklist | Boca Raton, FL | Call 561-955-8515

Before you go…

7 Steps to Make Sure Your Estate Plan is in Order

Make smart choices to protect your loved ones. Download our FREE guide.