By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Special Needs Trust Attorney
I recently researched if a transfer from a 401k/IRA to a Special Needs Trust (SNT) can be done without triggering an income tax consequence. The answer was as I expected, “no”.
If an individual wants to move a 401k/IRA to their SNT, this constitutes a taxable event, for each dollar withdrawn.
However, even though the individual will have to pay income taxes on any withdrawals from a traditional IRA, the IRS waives the 10% penalty for early withdrawals before age 59 ½ if the individual is disabled.
To discuss your NJ Special Needs Trust matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing consultations if you are unable to come to our office.