Using Roth Conversions of Legacy Retirement Plans to Fund Special Needs Planning.

Financial planners who engage in special needs planning (SNP) must be careful not to overlook legacy retirement plans (i.e., plans from previous employers) as possible sources of funding. While some research exists on the best practices for using Roth individual retirement account (IRA) conversions for general estate planning and wealth transfers, there is little guidance available on how to use Roth conversions of legacy retirement plans to fund SNP tools, such as special needs trusts (SNTs) and Achieving a Better Life Experience (ABLE or 529A) accounts. This article examines the strategy and reasoning for using Roth conversions of legacy retirement plans and suggests there are at least seven advantages of this strategy for clients with SNP issues: 1) access to funds at age 59½, rather than 70½; 2) no required minimum distribution (RMDs) in the lifetime of the account owner; 3) no future taxes; 4) reduced risk; 5) wealth transfer in perpetuity; 6) generally not subject to Medicaid recapture if properly structured (subject to certain conditions); and 7) no limitation on the amount of money that can be converted. [ABSTRACT FROM AUTHOR]