Charities May Now Be Named as Special Needs Trust Remainder Beneficiaries

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charities may now be named as special needs trust remainder beneficiaries | estate and probate legal group

Most parents worry about who will care for their children when they die. But families of special needs children have even more to plan for. It is often better to establish a special needs trust rather than leave money to the child in a will. The SECURE Act was founded in 2019 and was revamped to in SECURE Act 2.0 include more. You are now able to name qualified charities as remainder beneficiaries.

Charities as a Remainder Beneficiary

Many parents establish a special needs trust to care for their disabled or chronically ill child. The benefit of a trust is that the inheritance is not viewed as income and will not disqualify the child from government financial aid.

If the beneficiary passes away before all funds are used, the trust can transfer the remainder to a new beneficiary. Which, in this case, is a qualified charity (per the Internal Revenue Service Rules).

In the past, the SECURE Act (Setting Every Community Up for Retirement) stated the special needs trust could not pass the remaining money to a charitable organization. But now they can. Under the SECURE Act 2.0, you can name a charitable organization as a remainder beneficiary of a special needs trust that is funded with IRA retirement accounts.

An Example of Naming a Charity as a Remainder Beneficiary

Parents raising a child with special needs may rely on charitable organizations to help with essential care. When the parents establish a special needs trust, they may want to plan for the future beyond their child. If the child passes away with money left in the trust, the parents may want to give the remaining assets to charity. The trust can distribute money to the charity in smaller increments over a long period of time. This helps with tax issues that large donations can cause.

Leaving your retirement account to a special needs trust can help ensure your child has money available over an extended period. An experienced estate planning attorney can help you set up a special needs trust. And we can ensure that it follows the new SECURE Act and allows a charity as a remainder beneficiary.

Oak Brook Special Needs Trust Attorney

Do you have questions about setting up a special needs trust in Illinois? Contact us today at the Estate & Probate Legal Group at 630-864-5835. Our experienced attorneys understand applicable laws and can advise you on the best options to protect your loved ones.

Areas we serve: Cook, DuPage, Kane, Lake and Will counties.